Given this, you would think that the government would not make you pay income tax on that money as well. However, you would be wrong; you do need to pay taxes on unemployment income. Well, wrong and right, depending on what year you were unemployed.

Unemployment Taxes: Pay Now or Pay Later

During my unemployment, I had failed to fill out a W-4V form indicating that I wanted income taxes withheld from my unemployment benefits. I reasoned that come April I would be making much more money and could afford to pay the tax bill at the end of the year; besides, I could use all the money I could get at the time to cover things like the rent, food, student loan payments, and gas bills that didn’t cease just because my job did. Because of my choice I took a tax jab in April 2007 to the tune of $450 which doesn’t sound like a lot, but was something I had failed to plan for.

When you file for unemployment, I would recommend choosing to withhold taxes on your unemployment compensation as you receive it, which means the government will automatically take out a flat 10% no matter how much your paycheck is.

Some states exempt unemployment compensation from state income tax, but many states, such as Massachusetts, Wisconsin, and New York, take their tax share of your unemployment as well at around 5%. Check with your state’s Department of Revenue for more specific information.  

Those Who Don’t Need to Pay Unemployment Taxes

With the unemployment rate hovering around 10%, the government took action to make the first $2400 of your unemployment compensation you received in 2009 excluded from taxation (if you are married and both spouses were unemployed in 2009, each spouse may exclude $2400 from taxation, totaling $4800). If you were unemployed in 2008, or are unemployed in 2010, you must still pay income tax on your earnings. Also, even if you are exempt from the federal income tax in 2009, be aware that your 2009 earnings may still be liable for state income tax.

To determine if you’ll need to pay taxes on other income you make during the year, you can see the guidelines for minimum income to file taxes.

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What is the Marriage Tax Penalty?

Ten years ago, married couples had to pay more than double the taxes they would if they were two single filers. Owing more tax as soon as you married became known as the marriage tax penalty.

The culprits of the marriage tax penalty were standard deductions and tax brackets that were only larger than, but not double, the single deductions and brackets.

Marriage Tax Penalty History

When the 2001 Bush tax cuts were put in place, the marriage penalty tax was eliminated for most taxpayers by doubling the single standard deduction for married taxpayers. The tax brackets were also aligned accordingly, so there wouldn’t be any additional taxes just for getting married.

Marriage Tax Penalty Returns

When the Bush tax cuts expire at the end of the year, the marriage tax penalty will return, increasing taxes for many married couples.

The amount of tax differences will vary based on your situation. You can use the 2011 Tax Calculator to try to predict how it will impact your family. To use it as a marriage penalty calculator, fill it out twice, once as single and once as married to see the differences.

Those taking the biggest hit will be couples with one large income and one smaller income. Right now, couples with very different incomes often see a marriage tax benefit, sometimes called a marriage tax credit, under the current rules.

Married Filing Separate

The marriage tax penalty is different than married filing separate, which is a popular way to file in some states. For example, in Ohio, it’s often beneficial for spouses to use the filing status married filing separate rather than to file joint as they have more tax savings.

When I do a tax return, I always run it both ways, joint and separate, to see which method will have the biggest tax savings.

If the marriage tax penalty returns, we’ll probably see some changes to the most beneficial filing status too, which will be something to keep in mind if you often file separately.

Action Plan

Now even if the marriage tax penalty returns, I’m not going to recommend divorces across the board. If you are like me, the benefits of family health insurance will more than outweigh the costs of the tax increase. But I will be putting on my thinking cap to try to get creative and maximize our tax savings with the new rules!

And of course, Congress is being encouraged to make a decision on the expiring tax cuts and marriage penalty relief… so we’ll have to wait and see what happens.

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The Tax Foundation has a 2011 tax calculator that helps you project your 2011 income taxes based on all the options Congress is considering.

2011 Tax Calculator

The 2011 tax calculator has 4 scenarios based on what Congress decides to do:

1. Bush tax cuts expire in 2010.
2. Bush tax cuts are extended into 2011, supported by Republicans.
3. Obama tax cuts based on President Obama’s budget extending tax cuts for families making under $250k ($200k for individuals) and limits on itemized deductions.
4. Modified Democrat tax cuts based on Obama’s plan without limits on itemized deductions introduced last week.

Tax Calculator Inputs

The tax foundation outlines all of the tax parameters used to build the calculator so you can see where they make their inferences.

It includes 2011 tax scenarios for capital gains tax rates and many of the items included in the expiring Bush tax cuts.

You can check out the calculator at www.MyTaxBurden.org for your income tax 2011 planning.

2011 Tax Planning

We’re currently planning for 2011 taxes with various scenarios based on whether or not the Bush tax cuts expire.

With the 2011 tax calculator available, it should simplify some of the calculations, like when you should pay taxes on your 2010 Roth conversion.

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I had no idea long term capital gains are presently 0%. Are you sure?

Yes, Colin, I’m sure! Let’s take a closer look at capital gains and the capital gains tax rates for 2010.

Capital Assets

The IRS has a pretty broad view on capital gains, which come from capital assets. Their definition is:

Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.

Capital Gains Tax

Capital gains taxes are figured when you sell your capital assets. Here’s how it works:

Capital Gains and Losses. When you sell capital assets, if you sell it for more than you paid for it, you have a capital gain; if you sell it for less, you have a capital loss.

Reporting Capital Gains. You must report all capital gains on Schedule D, including investment or personal use property.

Deducting Capital Losses. Capital losses can be deducted on investment property, but not personal use propery. Capital losses first offset gains, then are deducted from income. The limit is $3,000 per year; you can carry forward any additional amounts to the future.

Long Term Capital Gains. Capital gains can be classified as long term capital gains if the property is held for more than one year. Long term gains will get preferential tax treatment, including the 0%.

Capital Gains Tax Exclusions. There are some exclusions, one of the most popular is your home. You can exclude $250,000 ($500,000 for couples) in capital gains on the sale of your home if you lived in it for 2 of the last 5 years.

2010 Capital Gains Tax Rate

The capital gains tax rates for 2008-2010 are:

0% Capital Gains Tax Rate

Obviously, you do need to be in the bottom two tax brackets to take advantage of the 0% capital gains tax rate. However, if you are close, you may want to do some careful planning and maximize some income shifting and retirement contributions to take advantage of it. Even if you don’t qualify for the 0% capital gains tax, you will still get the lower 15% capital gains tax during 2010.

2011 Capital Gains Tax Rate

The 2011 capital gains tax rates will go up if the Bush tax cuts expire in 2010. Just in case, I’m planning to take advantage of the 0% capital gains tax rate in 2010.

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In addition, many of the tax cuts that we’ve come to expect over the last decade are changing. I love to plan, so here’s what I’m currently working on:

2010 Planning Moves for Expiration of Bush Tax Cuts

1. Tax Rates. We’re planning to accelerate some of our income from 2011 to 2010. Instead of maximizing deferrals into our Solo 401k, we’ll take the income this year and plan to defer more next year.
2. Capital Gains. I’m selling the last of our individual stocks to take advantage of the lower long term capital gains rate. I also considered selling one of our rentals that appreciated significantly since we bought it at an auction, but we might hold off on that one right now since it has such a strong cash flow.
3. Itemized Deductions. We’re also planning to defer payments on some tax deductible items. Instead of paying our property taxes in December, we’ll plan to hold off on paying them until January. Same with our January mortgage payment, our year end charitable contributions, and any preschool expenses we normally pay at the end of the year. Think of it like normal tax planning in reverse!
4. Mortgage Premiums. Since you will no longer be able to deduct mortgage insurance premiums after December 31, 2010, you should call your lender and ask for the requirements to drop the coverage; most do so if your loan is at 80% or below of the value of your house. Otherwise it might be a good time to refinance, if doing so will bring you under the threshold to pay mortgage insurance.
5. Roth Conversions. We’re planning for some 2010 Roth conversions, but we’ll follow the Bush tax cuts closely before deciding when to pay taxes on the 2010 Roth conversions. You can wait until the tax deadline next year to make your decision; that’s what I’ll be doing.
6. Business Purchases. It’s time to make those large business purchases you were putting off. In 2010 you can deduct $250,000 in the year of the purchases. After the Bush tax cuts expire at the end of the year, the Section 179 expense deduction reverts back to $25,000 for 2011.
7. Estate Taxes. The estate tax exemption will go back to a $1 million next year. This ought to be a good reminder to update your beneficiaries and wills. I know that mine are out of date again, now that we have three kids.

At this point, I realize that we may get a new set of Obama tax cuts to keep our taxes down. However, I want to make sure that we’re in the drivers seat, no matter what Congress does.

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The home buyer tax credit extension will apply to both first time home buyers and existing home owners originally eligible for the tax credit.

Both the House and Senate approved the extension, which originally ended on June 30. The President must sign the home buyer tax credit extension before it becomes law.

Home Buyer Tax Credit Extension

The terms of the first time home buyer tax credit and existing home owner tax credit extension are:

• Home buyers with signed contracts will get until Sept. 30, 2010 to close on their new home.
• Sales contracts must have already been in place by April 30, 2010.
• Tax credits are still $8,000 for first time home buyers and $6,500 for existing home owners.

Why the Extension?

People had months to close, why do we need an extension? Apparently, slow banks are to blame. Especially in the case of foreclosures and short sales, where the banks often take many months to complete the transactions.

Will the Extension Apply to New Contracts?

No. The extension is only for buyers who are already under contract. If you are currently in the market to buy a house, you’re out of luck.

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I often trumpet the combination of a High Deductible Health Plan (HDHP) and Health Savings Account (HSA) as an effective way to save money on health insurance and receive a tax break on out-of-pocket expenses. The new health care bill won’t do anything to change HDHPs – in fact, they are being used as a model for the new state-sponsored health care exchanges. However, there will be a few key changes to HSAs.

HSA Changes

• OTC Medicines: Beginning in 2011, HSA funds cannot be used for over-the-counter medicines unless specifically prescribed by a doctor. This is similar to the new restrictions on FSAs, which will prevent funds from being used for items such as contact solution and bandages.
• Penalty: Unlike FSAs, HSA funds carry over from year to year. So if you max out your HSA and don’t use the funds, you can find yourself with a rather large balance after a few years. You can withdraw the funds for other purposes, but face both income taxes AND a 10% penalty. Starting in 2011, that penalty will become 20%. Currently, the penalty does not apply to those over 65 – since the health care bill does not specifically address that provision, I’m assuming it will stay the same.

HSA Planning and Impacts

If you think you’ll need the money for healthcare expenses now or in the future (or long term care expenses down the road), an HSA is a great way to stash money that can later be used tax free. But if you are making contributions at the expense of retirement contributions or meeting other savings goals, you might want to rethink your strategy. The new penalty means that you could pay 45% on non-qualified withdrawals if you are in the 25% tax bracket. So be sure to save only what you need in an HSA.

In addition, you should stock up on non-prescription medicines before the end of 2010. Starting in 2011, ask your doctor to write
prescriptions if you have the choice between a prescription and non-prescription drug – this will allow you to run the expense through your HSA.

Check out the entire health care series:

• Part 1: Individual Mandate
• Part 2: $250 Medicare Donut Hole Checks
• Part 3: Health Insurance for Young Adults
• Part 4: 1099 Changes in Health Care Bill
• Part 5: Flexible Spending Account Changes
• Part 6: Health Savings Account Changes
• Part 7: Student Loan Forgiveness Program

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Flexible Spending Accounts, or FSAs, are an excellent way to pay for healthcare expenses using pre-tax money. If you take full advantage of them, you can save money on eligible expenses ranging from over-the-counter medicine to the cost of transportation to and from your doctor’s office. In the near future though, FSAs will be more regulated than they have been in the past.

Flexible Spending Account Changes

• OTC Medicines: Beginning in 2011, FSA funds cannot be used for over-the-counter medicines unless specifically prescribed by a doctor. Currently, FSA funds can be used for OTC drugs and other items such as eyeglasses, contact solution, bandages and non-prescription forms of birth control.
• Contribution limits: Beginning in 2013, FSA contributions will be limited to $2,500 each year with annual inflation increases. Today, there are no standard limits, though most employers cap the maximum somewhere below $5,000. Most people put away less than this, but if you are one of those who takes full advantage of your employer’s current maximum, you may see a reduction in the amount you are able to save in the future. Note that this new limit is per employee, regardless of whether you cover just yourself or your full family. The combination of a Health Savings Account and High Deductible Health Plan could allow you save more than double this amount tax-free if you are covering a family. Of course an HDHP is not for everyone.

FSA Impacts and Planning

Because the earliest changes won’t take place until 2011, and won’t be fully phased in until 2013, you have the opportunity to do a little planning. If you have been putting off expensive things like laser eye surgery or braces, consider planning to do those things in 2011 or 2012 so that you can fund a larger portion (or even the whole thing) with pre-tax funds. If you are in the 25% tax bracket, you save $250 for each $1,000 you put in an FSA and subsequently use on approved expenses! As an example, saving $5,000 in an FSA in 2012 and using it to pay for braces will save you $625 in taxes compared to paying for them in 2013 when you can only save $2,500 in your FSA, and $1250 in taxes compared to not using an FSA at all.

In addition, plan to fully stock up on over-the-counter medicines (and other things that don’t require a prescription, such as reading glasses) at the end of 2010. Once 2011 hits, be sure to ask your doctor for a prescription for OTC medicines that you truly depend on, such as certain brands of eye drops or allergy medicine.

Lastly, remember that some things about FSAs won’t change. For instance, the amount you choose to put away each year will expire at the end of the year or shortly after, so don’t put away more than you can reasonably expect to spend.

Check out the entire health care series:

• Part 1: Individual Mandate
• Part 2: $250 Medicare Donut Hole Checks
• Part 3: Health Insurance for Young Adults
• Part 4: 1099 Changes in Health Care Bill
• Part 5: Flexible Spending Account Changes
• Part 6: Health Savings Account Changes
• Part 7: Student Loan Forgiveness Program

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Much has been written about the impact of health care reform on small businesses. But one hidden provision of the bill that has seemingly nothing to do with healthcare will affect pretty much every business. Starting in 2012, businesses will be required to send 1099s to any individual or corporation to which they pay more than $600 per year.

1099 Changes

Currently, businesses must send 1099s to all individuals who provide more than $600 worth of services to that business in a calendar year. Independent contractors are used to receiving this form, and paying self-employment taxes on the income.

Beginning in 2012, the 1099 changes in the health care bill will extend required 1099s to all payments over $600 made to any vendor – this applies to both individuals and businesses/corporations, and to goods as well as services. So if your gourmet basket-making business buys $900 worth of wine and cheese, you’ll have to send a 1099 to your supplier. As this Business Week article points out, the requirement will even apply to money you spend at places like FedEx or the local gas station.

1099 Reporting Change Impacts

If you are a business owner, prepare to spend a lot more time collecting data, keeping records, and generating/sending paperwork. And if you have previously provided goods and failed to report income, know that that will change starting in 2012.

The government hopes the changes in 1099 reporting will generate additional tax revenue on income that has previously gone unreported – and it’s in the health care bill because that revenue could potentially pay for some of the bill’s costs.

More details will be known about Form 1099 changes when the IRS releases further provisions – a date when those provisions will be released is not yet known.

Check out the entire health care series:

• Part 1: Individual Mandate
• Part 2: $250 Medicare Donut Hole Checks
• Part 3: Health Insurance for Young Adults
• Part 4: 1099 Changes in Health Care Bill
• Part 5: Flexible Spending Account Changes
• Part 6: Health Savings Account Changes
• Part 7: Student Loan Forgiveness Program

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Since December 31, 2010 is the date that the Bush tax cuts expire, I’m sure there will be a lot of debate in Congress this year over all of these. Here’s what we’re looking at:

Tax Cuts Expiring in 2010

1. Tax Rates. The top tax rate will go from 35% to 39.6%. In addition, if nothing is done, it will mean higher taxes across the board. See the proposed 2011 tax rates for more information.
2. Capital Gains. The 0% long term capital gains rate will go away. Capital gains rates will go up to 10% for lower tax brackets and from 15% to 20% for higher tax brackets.
3. Dividends. Dividends will be taxed as ordinary income, with the new higher rates. Right now the dividend tax rates are 10% and 15%.
4. Child Tax Credit. The child tax credit will return to $500 from the current $1,000 per child. In addition, it may not be refundable for some taxpayers.
5. 529 Plans. 529 plan withdrawals will not be allowed tax free for computer or Internet access.
6. Business Taxes. In addition, various business taxes will change including the payroll tax credit and section 179 expense deduction.
7. Estate Taxes. Without any action, the estate tax (or death tax as some like to call it) exemption will go back to a $1 million exemption.
8. Other Tax Credits. The tuition credits will be limited, as will the earned income tax credit.
9. Mortgage Premiums. You will no longer be able to deduct mortgage insurance premiums after December 31, 2010.

No matter what happens, we’re going to have some planning to do, like determining when should you pay taxes on your 2010 Roth conversion?

Obama Tax Cuts

Will we have a new set of tax cuts in place before year end? Will President Obama extend the Bush tax cuts for 10 more years?

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Roth Conversion When to Pay Tax?

For 2010 Roth conversions, your options of when to pay tax are:

• Include the entire Roth conversion on your 2010 taxes.
• Include half of the Roth conversion on your 2011 taxes and half on your 2012 taxes.

Spreading the Roth conversion over two years will be the automatic option. However, if you want, you can elect to have the entire conversion included in your 2010 taxes.

Which Year Should You Pay the Taxes?

Here is where a little planning will come into play for the tax treatment of Roth conversions. Depending on your situation, you might be better off to include the Roth conversion and pay the taxes in 2010.

If your taxes will be higher in 2011 and 2012, because the 2011 tax rates might be higher than they are currently, it might be better to elect the income to be included in 2010.

In addition, you’ll have to estimate your income in the next three years. If you expect higher income in 2011-2012 than in 2010, it might be better to go ahead and include the income in 2010.

The good news is that you’ll be able to wait awhile to see what happens to the tax rates and how much income you’ll have before you make your election. You likely won’t have to make your election until the tax deadline next year.

You can also see other Roth IRA conversion considerations.

How to Pay Taxes on Roth Conversions

The tax you pay on your Roth conversion will be reported on your income taxes. The amount of tax will be calculated based on including your conversion amount in your taxable income subject to the tax brackets based on the year you elect.

To make sure you have enough withheld to cover the increase in taxes, you may want increase your withholding with your employer or make quarterly tax payments for a Roth conversion.

And if it turns out that you’ll owe more in taxes than you anticipated, you can always do a recharacterization.

Avoid Taxes on Roth IRA Conversions

If you don’t want to pay tax at all, you can always implement the 2010 Roth IRA conversion loophole or look into the Roth Conversion Strategy to Minimize Taxes.

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2011 Tax Rate Changes

There are many things that could happen with the 2011 tax rates. Congress could let all of the 2001 Bush tax cuts expire, which would essentially raise taxes for all the tax brackets.

Or they could keep the tax cuts in place for those earning less than $250,000, but bring back the two higher tax rates in 2011 for those making over $250,000 as they have alluded to in the 2010 budget proposal. The proposal also includes expanding the tax bracket for those in the 28% bracket.

Or they could do something totally different and surprise us all. To figure out what your taxes will look like in 2011, you can use the 2011 Tax Calculator.

2011 Tax Rates & Brackets Proposed

Since we have to assume something for tax planning, we’ll use the projections from the proposed budget. Here’s what it could look like under the budget proposal.

These tax rate projections were developed by the Tax Policy Center.

If you want to compare to the current tax rates, check out the 2010 Tax Brackets.

Of course it’s anyone’s guess as to where we’ll end up! Stay tuned for more on 2011 tax planning!

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Since we opened multiple accounts at ING to get $25 Sign Up Bonuses for our kids, they’re earning interest on their accounts, which reminded me to check into the kids tax filing rules. (Signing up for College Advantage $25 Sign Up Bonuses do not count as income for your child.)

If your kids earn interest and dividends, or have a job, check out the requirements for filing taxes.

2009 Kids Tax Filing Requirements

If you claim your child as a dependent on your return, the kids need to file taxes if ANY of the following are true:

• Earned income, from a job for example, is more than $5,700.
• Unearned income, including dividends or interest, is more than $950.
• Self employment net earnings are more than $400.
• Earned and unearned total income is more than the larger of $950 or earned income plus $300.

Also, if interest, dividends and other investment income are more than $1,900, you’re going to get hit with the kiddie tax (which means you’ll pay your tax rate on part of your child’s income).

Filing a Child’s Tax Return

You can file your child’s taxes for free at TurboTax.

If you want, you can also attach it to your return if the income is less than $9,500 and only from interest or dividends. This option is available to children under age 19 (or a full time student under 24) using Form 8814.

A word of caution though, qualified dividends or capital gains may be taxed at a higher rate if you attach it to your return instead of filing the child’s return separately.

More Filing Requirements

There are other circumstances when children must file a tax return. For more information see When Do Kids Need to File Taxes? or Publication 929, Tax Rules for Children and Dependents.

For more information when others must file, see minimum income to file taxes.

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So how is the IRS going about its debt collections?

Overseas Accounts

Based on US pop culture it is easy to think that every rich, James-Bond like American has an account in the Cayman Islands worth millions of dollars. Apparently the IRS has been watching these movies as well, as they are going after these accounts, which number in the tens of thousands. After some strong-arming from the U.S. government in 2009, several traditional countries where secret, tax-evading bank accounts are known to be kept (Switzerland, Liechtenstein and Luxembourg for example) are now going to cooperate more with the United States on identifying the accounts and making sure that the taxes owed on these accounts have been paid. Over 14,700 individuals voluntarily came forward with their overseas account information, and the IRS is currently investigating over 7,000 overseas accounts.  Also, in a settlement with the giant UBS Swiss bank, the US will be given 4,450 bank account names.

On top of that, the IRS is now expecting more information from individuals with overseas accounts. Individuals are now required to file a revised and stricter Foreign Bank Account Report by June 30 each year if the combined value of all foreign accounts in the previous calendar year exceeded $10,000. If you disclose that you have an overseas account, instead of reporting a vague range of money that is in that account, you now must include an exact dollar amount. Another new rule is that the full address of the bank where the account is held now must be disclosed. For more information on changes to this form, see the Anti-Deferral and Anti-Tax Avoidance information.

Hiring More Employees

The IRS is increasing their manpower in order to catch tax cheaters. In December of 2009, 100 new employees were hired in order to get a new “high wealth unit” within the IRS up and running. The high wealth unit will be focusing on trusts, real estate investments, privately held companies and other business entities controlled by rich individuals in the hopes that by looking holistically at a wealthy individual’s entire asset portfolio, they will find taxes that have not been paid.

Incentives to Snitch on Your Tax-Evading Friends, Family, and Bosses

The IRS paying people who tattle on tax cheaters with evidence is not a new concept, we discussed it previously when readers answered whether or not they report all their income; according to a Forbes article dated December 14^th, 2009, from 2004-2005, 428 informants received a total of $12 million for their information that recouped the IRS $168 million. But in the new passing of the Tax Relief and Health Care Act in 2006 (effective 2008), the IRS upped the ante by paying between 15%-30% to people who tip-off tax cheaters for cases of $2 million plus. While no funds have yet been paid, many cases are in the works.

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Taxable Items

Generally speaking, the IRS taxes anything that leaves you in a better economic position than you were before you received it. Sometimes, like when you sell a house, the IRS has credits or deductions to eliminate all or part of the tax. Other times, you simply have to pay up. Prepare to open your wallet for:

• Scholarships/financial aid: Scholarships and financial aid used for tuition or other required fees, books, or supplies are not taxable. However any funds that are used for living expenses, travel, or expenses that are not required are considered income by the IRS and fully taxable. Students not enrolled in a degree program may have to pay taxes on all financial aid, even when spent on otherwise qualified expenses.
• Debt settlement: If you find yourself unable to pay credit card or other debts, the lender may negotiate with you to pay a reduced amount. Any forgiven debt is subject to taxation, and will be reported to the IRS if it is more than $600. If you have a negative net worth at the time of the settlement, the IRS may waive the tax liability. Until 2012, this does not apply to debt cancellation involving a principal residence mortgage. Taxpayers also do not owe taxes on any debts discharged through bankruptcy.
• Gambling Winnings: If you hit the jackpot in Vegas or win the lottery, you will owe the IRS a nice chunk of change. This is one of the main reasons people might choose to take annual payments, when they’re an option, rather than a lump-sum payout.
• Prizes: Along with lottery and other gambling winnings, you will have to pay taxes on any prizes you received, regardless of whether they were given in the form of cash. If your church or child’s school sold raffle tickets, and you win a car, you’ll have to pay taxes on the cash value of that car. Ditto for any game show or contest winnings.

Exceptions to the Rule

• Gifts: If you received a gift from a friend, relative or perfect stranger, you do not have to pay taxes on it – but they might. However, be aware that any money exchanged between an employer and employee is considered compensation and therefore taxable income.
• Fringe Benefits: To encourage employers to provide more benefits across the board, the IRS allows them to take a tax deduction for the value of many of those benefits, and also allows you to receive the benefits tax free. Tax-free benefits include things like your health insurance, childcare assistance, and access to gym facilities on the employers’ premises. But other benefits may be taxable, especially if they’re only offered to certain employees – your employer should notify you if you are affected.

If you’re looking for something specific that you don’t see on the list, feel free to ask about it in the comments. But as a general rule of thumb, the answer to your question is simple: if you had measurable economic gain, it’s probably taxable. Exceptions do exist, so check with your accountant or tax preparer if you’re really not sure!

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