It’s Tax time, Don’t Stress Out
Tax season brings up a lot of emotion for small business owners. You may not like that bottom line. If you have been keeping track of your book-keeping all year, most likely that number will not be a surprise. Remember, deep breaths always help bring down the stress and clear your head. Today I have a guest post from a finance expert that will help you take some stress out of this tax season.
Note: This post contains affiliate links, which means that if you click on one of the product links, I may receive commission. I only recommend what I believe in.
You Don’t Have to Pay Taxes on Everything
By Julie Morris
Nothing’s certain but death, taxes, and a few key items you don’t have to pay taxes on (at least this year) in the United States. Every year, the IRS can and does make changes that can seriously impact you, including which items you do and don’t have to pay taxes on. Always check the IRS site to see the latest regulations, but for the 2016 tax year, you can rest easy knowing that at least a few of your payments and purchases are legally tax-free.
There’s a reason you hear the phrase “taxable income,” yet rarely hear the phrase “non-taxable income.” A lot more revenue falls into the former camp. However, that doesn’t mean the latter camp is non-existent. For starters, you don’t have to pay for the profits from your house if you sold a home. It’s been a lifesaver in the tax code for years, allowing you to enjoy tax-free income for the sale of your personal residence (emphasis on “personal” – this doesn’t count for professional flippers, realtors, and the like). The only catch? You have to have lived in the residence for two of the last five years prior to selling and you’re maxed at $250,000 in profits for singles and $500,000 for married couples.
For the tax savvy, that non-taxable income on the sale of personal real estate has been a mainstay. Lesser known non-taxable income includes profits from selling your personal assets. Oftentimes, this means the items in that home you sold, but not always. However, there are some gray areas here. For example, you’re free to keep profits from selling a car, furniture, and electronics but you have to sell it for less than the purchase price. There are also items that don’t count, like collectibles and jewelry (ask your CPA for clarification). In other words, keep those receipts and starting digging up old ones!
Employers and Exes with Benefits
Some people might not even fathom paying taxes on employee and related fringe benefits—and that’s a good thing, since these perks are largely non-taxable income. However, steer clear of cold, hard cash here. Employers give gifts in lieu of money not because they’re being stingy, but quite the opposite. You don’t have to pay taxes on gifts, but you do if that gift is cash of a certain amount. Only some employee benefits are non-taxable, and your boss might be in the know (or not). These lists of “taxable and “non-taxable” can get complicated, but a few freebies include help with tuition, moving expenses, meals in the cafeteria, a phone, or other electronics provided by your boss, tickets to events, and so on.
Child support is another biggie. Good news for those who are receiving child support: It’s non-taxable income. However, just make certain that it doesn’t blur the line of alimony, because alimony is indeed taxable. For complicated ex-relationships and divorces, it’s yet another reason to have a professional mediator.
If you got worker’s compensation payments or a medical settlement, you’re in non-taxable income category. However, the interest you may have earned from related payments, punitive damage income, and lost wages payments are taxable. If an attorney was involved in such settlements, they’ll know which payments are taxable and which aren’t.
If you received money as a gift from a friend or family member up to a certain amount (around $14,000, but it changes yearly), it’s also tax-free. After all, it was a genuine gift, not income. And if you’re thinking about giving a big cash gift to a loved one? Always check to make sure they’ll be in the clear and Uncle Sam won’t be getting a cut of your generosity.
Additional non-taxable income includes payouts from life insurance and frequent flier miles. Don’t pay more than necessary, and always make sure you have a pro combing over the final numbers.
My guest blogger today, Ms. Morris is a life and career coach who strives to help others live the best lives that they can. She believes she can relate to clients who feel run over by life because of her own experiences. She spent years in an unfulfilling career in finance before deciding to help people in other ways.
- If you are a do it yourself person, you might try (affiliate) TurboTax Home & Business 2016 Tax Software Federal & State + Fed Efile PC/MAC Disc [Amazon Exclusive]
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If you liked this article, you will love my article 23 Tips to Monetizing Your Newsletter.
Sheri Kaye Hoff, PhD.
Business and Life Strategist known for inspiring massive action and being a catalyst for personal and business growth, joy, and profits in a way that is fun, relaxing, and fulfilling, Sheri Kaye Hoff inspires people to the do work they love and make money. She is a near death survivor and experienced a miraculous healing. Learn more about Sheri
Tax Advice Disclaimer: The information on this website should not be used in any actual transaction without the advice and guidance of a professional Tax Adviser who is familiar with all the relevant facts.
Although the information contained here is presented in good faith and believed to be correct, it is General in nature and is not intended as tax advice. Furthermore, the information contained herein may not be applicable to or suitable for the individuals’ specific circumstances or needs and may require consideration of other matters.
sherikayehoff.com, juliemorris.org, and Your Path to Success Enterprises, LLC assumes no obligation to inform any person of any changes in the tax law or other factors that could affect the information contained herein.