Nontaxable income is money that is not subject to income tax.  Prior to receiving the income, you should confirm with the person making the payment that the income is nontaxable.  A statement may be issued to document that income was paid, however this does not mean that the income is subject to tax or that a return must be filed.  Also, many statements will have a code which indicates that the income is nontaxable.   The statement will generally be issued to you, as the recipient, and the taxing authorities.  Examples of income and payment received that are not subject to tax and not included in gross income include –

• Campaign contributions, unless diverted to personal use or an office account.
• Cash rebates from a dealer or manufacturer.
• Child support.
• Casualty insurance payments that do not exceed the fair market value of the insured item.
• Compensation paid for permanent loss or partial loss or function or permanent disfigurement pursuant to an employer provided accident and health plan.
• Compensatory damages paid in a lump sum or in periodic payments for physical injury or physical illness.
• Disability benefits received for loss of income or earning capacity as a result of injuries sustained under a no-fault care insurance policy.
• Disaster Mitigation payments received immediately following damage to property as a result of a natural disaster.
• Disaster Relief grants received under the Disaster Relief and Emergency Assistance Act to help with housing, medical, dental, transportation, funeral expenses, personal property, and other necessary and serious needs.
• Disaster Relief payments received for expenses that are not paid by insurance or otherwise, if the payment is made to:
  • Reimburse or pay reasonable and necessary personal, family, or funeral expenses that result from the disaster.
  • Reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of your home or replacement of contents in your home due to the disaster.
  • By a person engaged in the furnishing or sale of transportation on a common carrier because of the death or physical injury of a person due to the disaster.
  • By a government in connection with a qualified disaster in order to promote the general welfare.
• Down payment assistance on a home from a nonprofit organization.
• Energy conservation subsidies received directly or indirectly from a public utility, for purchase or installation of an energy conservation measure for a dwelling unit.
• Estate and trust income that the trust paid the tax on.
• Foster care payments received from a state, political subdivision, or qualified foster care placement agency
• Gifts and Inheritances that the person making the gift or inheritance already paid the tax on.
• Hardest Hit Fund and Emergency Homeowners’ Loan Program payments.
• Home Affordable Modification Program payments.
• Interest on qualified savings bonds used to pay qualified higher education expenses.
• Interest on state and local government bonds/obligations.
• Long-term care insurance payments received for personal injury or sickness.
• Lump-sum benefits death benefits (one-time payment to a spouse and children of the decedent.
• Medical savings account withdrawals used to pay qualified medical expenses.
• Medicare benefits received from Part A (Hospital Insurance Benefits for the Aged) and Part B (Supplementary Medical Insurance Benefits for the Aged).
• Mortgage assistance payments made under the National Housing Act.
• Property damage payments.
• Relocation payments and Home Rehabilitation grants received under the Housing and Community Development Act from a local jurisdiction to displaced individuals moving from a flood damaged residence to another residence.
• Replacement Housing payments received under the Uniform Relocation Assistance and Real Property Acquisition Policies Act for Federal and Federally Assisted programs.
• Sale of a home
• Scholarship and Fellowships received by a candidate for a higher degree (amounts used for room and board are taxable).
• Supplemental security income (SSI).
• Welfare and other public assistance.
• Work-training program payments received from a state agency for taking part in such program.
• Workers compensation paid under a workers comp act or statute