Chapter 5 - Chapter 5 Chapter 5 Exclusions(Income not...

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Unformatted text preview: Chapter 5 Chapter 5 Exclusions (Income not reportable) Gifts & Inheritances Life Insurance Proceeds Scholarships Awarded Damages Compensation for Injuries & Sickness Workers Compensation Employer­Sponsored Accident & Health Plans Long­Term Care Insurance Benefits Meals & Lodging Paid by Employer Other Fringe Benefits Foreign Earned Income Municipal Bonds/Educational Savings Bonds Categories of EXCLUSIONS Categories of EXCLUSIONS General Categories General Categories Gifts & Inheritances Exception: Gifts to Employees by their employers Exception: (unless paid to surviving spouse or children as a result of a disaster or death of employee, not final compensation, and is stated company policy) Life Insurance Proceeds (death benefits or accelerated Life death benefits) -Cashing in a policy may result in income if proceeds exceed premiums paid. -Annuitizing a death benefit usually results in income -Annuitizing Scholarships for Tuition, Books, Supplies ONLY Exception: Room & Board is taxable Exception: taxable General Categories ­cont­ General Categories ­cont­ Compensation For Physical Injury/Illness Compensation Physical Exclusions are NOT allowed for: Exclusions NOT Replacement of Income Replacement Punitive Damages Emotional Distress; Libel; Slander Discrimination Awards Property Damage In Excess of Property Basis General Categories ­cont­ General Categories ­cont­ Accident & Health Insurance Benefits from a policy Accident purchased by the taxpayer (including replacement income, i.e. disability insurance) income, Workers’ Compensation Benefits Employer Sponsored (paid) Accident & Health Plans Accident Only payments for qualified medical expenses & AD&D are excluded Payments for income replacement are includible in income includible in Benefits from Medical Reimbursement Plans & HSA’s Long-term care policy (For 2010: greater of $290/day or Long-term actual daily cost) (up from $280/day in 2009) actual General Categories ­cont­ General Categories ­cont­ Meals & Lodging Furnished by Employer Must Be On Employer Premises AND Must On AND For Employer’s Convenience Certain Employer-Provided Fringe Benefits Cafeteria Plans Choice of non-taxable benefits Flexible Spending (Benefit) Plans Flexible “Use It or Lose It” Plans General Categories ­cont­ General Categories ­cont­ Employer Provided Fringe Benefits -contEmployee Discounts -up to gross profit % for goods -up to 20% for services Moving Expense Reimbursements De Minimis Benefits – too small to count Parking & Transportation Allowance - $230/month for transportation - $230/month for parking No Additional Cost Services General Categories ­cont­ General Categories ­cont­ Municipal Bond Interest Income Stock Dividends (reduces basis instead) Interest from Educational Savings Bonds Earnings from §529 Tuition Programs Foreign Income (up to $91,500 for 2010) Time requirement = 330 days out of 365 days Minister/Military Housing Allowance Discharge of Indebtedness via Bankruptcy, Discharge Insolvency, and “conditional” student loans Insolvency, ...
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