Different Types Of Income That The IRS Can’t Tax You
If you are a wise taxpayer, you understand you should not pay the government more or less than what you owe in taxes to prevent IRS issues. The government can’t legitimately collect taxes on various income types, and not a lot of taxpayers realize this. Because tax law does not allow it, the IRS cannot tax particular types of income. You can keep your money if you are aware of what the IRS can’t tax you with, but to avoid tax issues, you should do everything correctly. One of these types of income is tax-free interest. This is income earned from political entity entitled to freedom from federal taxes like income earned from state-issued bonds and other instruments. Municipal bonds is the common name for these types of investment instruments, and the value of their tax benefit actually rises when your marginal tax rate rises. Basically, if your overall income goes up, the value of the bonds increases in parallel. Making money from a car pool is another income that can’t be taxed. You can exclude your car pool earnings without IRS problems. Another source of income that’s excluded from taxes is selling your home. You can exclude up to $250,000 if you sell your house, and if you file a joint return with your partner, $500,000. Every two years, you can claim this exclusion. A partial exclusion can also be claimed if you sell your house after less than 2 years. Of course, you should consult a tax professional to make sure that you’re doing this the correct way as there are a few restrictions. Getting a raise doesn’t only mean getting an increased paycheck amount. You can opt to have your employer pick up the cost of a better insurance option or a higher healthcare plan. This makes it impossible for the IRS to tax your raise and you won’t need to deal with possible IRS issues.
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