Money comes from various sources like wages from a job, returns on investment, business income, Social Security benefits, and others.
Some of those incomes are taxable while some aren’t, so it estimating and calculating the taxable income is difficult.
But if you estimate your taxable income it will give an idea of how much you’ll owe.
You can do some tax planning and reduce the amount you owe or adjust your withholdings by crunching those numbers beforehand.
According to IRS rules, all income unless specifically exempted by law is taxable. The most common taxable sources of income are:
Salaries or wages, commissions, tips, bonus, capital gains, income from freelancing, self-employment, or a business, any royalty, rental income, few interest and dividends, gambling winnings, unemployment compensations. Taxable income can also be in the form of property or services.
Likewise many types of income aren’t taxable like -
Child support payments, interest from municipal bonds, life insurance proceeds, disability benefits if the premiums for the policy is already paid, capital gains from the sale of your primary residence, and gifts and inheritances
the recipient of gifts doesn’t get taxed, the gift-givers need to file a gift tax return if the gift given to any one person during the year is worth more than $15,000.
The gifts made to the spouse for any amount are not taxable. Inheritances also aren’t taxable at the federal level.
Even if all your income is in the taxable category, you won’t owe tax on every dollar, because you can claim certain deductions and reduce your gross income to arrive at taxable income.
You can calculate your taxable income in a few simple steps.
You can add up all sources of taxable income and make Adjustments to income by going on Schedule 1 of your tax return, then claim the standard deduction then consider claiming the qualified business income deduction.
This deduction is equal to 20% of qualified business income (QBI).
Reference Source: Forbes Advisor
https://www.compareclosing.com/mortgagenews/what-is-taxable-and-non-taxable-income/
