Table of Contents
For the latest information about developments related to Publication 525, such as legislation enacted after it was published, go to www.irs.gov/pub525.
Achieving a Better Life Experience (ABLE) account. This is a new type of savings account for individuals with disabilities and their families. For 2015, you can contribute up to $14,000. Distributions are tax-free if used to pay the beneficiary's qualified disability expenses. See Pub. 907 for more information.
Public safety officers. Certain amounts you receive under federal or state law due to a death or disability of a public safety officer in the line of duty may be excluded from gross income. See section 104(a)(6) for more information.
Certain amounts received by wrongfully incarcerated individuals. Certain amounts you receive due to a wrongful incarceration may be excluded from gross income. See section 139F for more information. Note. This new law was enacted December 18, 2015 as part of P.L. 114-113 and applies to all tax years. Generally, you have 1 year from its enactment to claim a credit or refund if you included such amounts in gross income in previous years, even if that claim is otherwise not allowed by law.
Qualified Medicaid waiver payments. Certain payments you receive for providing care for an eligible individual in your home under a state's Medicaid waiver program, are not included in your income. These payments may be excluded from your income whether or not you are related to the eligible individual receiving care.
Virtual Currency. For federal tax purposes, virtual currency is treated as property. Bitcoin is an example of virtual currency. Transactions using virtual currency (such as Bitcoin) must be reported in U.S. dollars.The fair market value of virtual currency (such as Bitcoin) paid as wages is subject to federal income tax withholding, FICA tax, FUTA tax and must be reported on Form W-2. Notice 2014-21, 2014-16 I.R.B. 938 describes how virtual currency is treated for federal tax purposes and is available at www.irs.gov/irb/2014–16_IRB/ar12.html.
Additional Medicare Tax. In addition to the 1.45% Medicare tax, a 0.9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than:
$125,000 if married filing separately,
$250,000 if married filing jointly, or
$200,000 if single, head of household, or qualifying widow(er).
For more information, see Form 8959 and its instructions.
Net Investment Income Tax (NIIT). The NIIT applies at a rate of 3.8% to certain net investment income of individuals, estates and trusts that have income above the threshold amounts. Individuals will owe the tax if they have net investment income and also have modified adjusted gross income over the following thresholds for their filing status: Married filing jointly, $250,000; Married filing separately, $125,000; Single, $200,000; Head of household (with qualifying person), $200,000; Qualifying widow(er) with dependent child, $250,000. For more information, see Form 8960 and its instructions.
Terrorist attacks. You can exclude from income certain disaster assistance, disability, and death payments received as a result of a terrorist or military action. For more information, see Sickness and Injury Benefits, later, and Pub. 3920, Tax Relief for Victims of Terrorist Attacks.
Gulf oil spill. You are required to include in your gross income payments you received for lost wages, lost business income, or lost profits. See Gulf oil spill under Other Income, later.
Qualified settlement income. . If you are a qualified taxpayer, you can contribute all or part of your qualified settlement income, up to $100,000, to an eligible retirement plan, including an IRA. Contributions to eligible retirement plans, other than a Roth IRA or a designated Roth contribution, reduce the qualified settlement income that you must include in income. See Exxon Valdez settlement income under Other Income, later.
Foreign income. If you are a U.S. citizen or resident alien, you must report income from sources outside the United States (foreign income) on your tax return unless it is exempt by U.S. law. This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2, Wage and Tax Statement, or Form 1099 from the foreign payer. This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). If you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. For details, see Pub. 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
Disaster mitigation payments. . You can exclude from income grants you use to mitigate (reduce the severity of) potential damage from future natural disasters that are paid to you through state and local governments. For more information, see Disaster mitigation payments under Welfare and Other Public Assistance Benefits, later.
Qualified joint venture. A qualified joint venture conducted by you and your spouse may not be treated as a partnership if you file a joint return for the tax year. See Partnership Income under Business and Investment Income, later.
Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that otherwise would be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
You can receive income in the form of money, property, or services. This publication discusses many kinds of income and explains whether they are taxable or nontaxable. It includes discussions on employee wages and fringe benefits, and income from bartering, partnerships, S corporations, and royalties. It also includes information on disability pensions, life insurance proceeds, and welfare and other public assistance benefits. Check the index for the location of a specific subject.
In most cases, an amount included in your income is taxable unless it is specifically exempted by law. Income that is taxable must be reported on your return and is subject to tax. Income that is nontaxable may have to be shown on your tax return but is not taxable.
You and your employer agree that part of your salary is to be paid directly to one of your creditors. You must include that amount in your income when your creditor receives it.
Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
334 Tax Guide for Small Business
523 Selling Your Home
527 Residential Rental Property
544 Sales and Other Dispositions of Assets
550 Investment Income and Expenses
554 Tax Guide for Seniors
559 Survivors, Executors, and Administrators
575 Pension and Annuity Income
907 Tax Highlights for Persons with Disabilities
915 Social Security and Equivalent Railroad Retirement Benefits
970 Tax Benefits for Education
4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments
Form (and Instructions)
1040 U.S. Individual Income Tax Return
1040A U.S. Individual Income Tax Return
1040EZ Income Tax Return for Single and Joint Filers With No Dependents
1040NR U.S. Nonresident Alien Income Tax Return
1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
W-2 Wage and Tax Statement
See How To Get Tax Help , near the end of this publication, for information about getting these publications.
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