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The Good Life Report - Taxable or Nontaxable?

"The fire is winter's fruit"

-Arabian Proverb


Do You Know the Difference Between Taxable and Nontaxable Income?

All income you receive is taxable unless the rules explicitly state that it isn't. According to the IRS, taxable income includes earned income like wages as well as any income earned by bartering or the exchange of property or services. Rental income is taxable as are other forms of unearned income like interest and dividends or Social Security. 

Some income is not taxable unless certain conditions are met. For example, life insurance proceeds are usually not taxable to the beneficiary unless you redeem a life insurance policy for cash. Any amount you receive above the cost of the policy is taxable. State and local income tax refunds may be taxable and should be reported on your federal taxes. 

There are also some forms of income that are usually not taxable, like:

  • Gifts and inheritances.
  • Child support payments.
  • Welfare benefits.
  • Damage awards for physical injury or sickness.
  • Cash rebates from a dealer or manufacturer for an item you buy.
  • Reimbursements for qualified adoption expenses. 

*This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

**Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments. 

Tip adapted from IRS.gov9

Choose to Make Your Plate "MyPlate"

Ah, the Food Pyramid. It had a lot of flaws, but we're not going to address them all right now. Its major weaknesses were that it generalized recommended servings per day and poorly defined portion sizes. So, in 2008, the U.S. Department of Agriculture implemented a user-friendly redesign: the pyramid was transformed into a plate. 

The concept behind the MyPlate design was somehow both revolutionary and seemingly obvious. After all, we eat off a plate, not a pyramid. Portions are easier to see. Make half the plate fruit and vegetables; the other half, grains and protein. A serving a dairy (or non-dairy alternative) on the side. Easy, right?

Take advantage of this method the next time you sit down for a meal and see what adjustments you can make to make your plate even healthier. 

Tip adapted from ChooseMyPlate.gov10


What occurs once in a minute, twice in a moment, but never in a decade?

Last week's riddle: Two fathers and two sons went truffle hunting. Each found a truffle yet they found only three in all. Why?  Answer: The truffle-hunting party was made up of three people - a man, his son, and his grandson.

Happy snowy owl on Jones Beach, Long Island, New York

Sources:
9. IRS.gov, September 19, 2020
10. ChooseMyPlate.gov, 2020