As we have noted in prior posts, January is the beginning of tax season. The IRS recently announced that the season has officially began since it will now be accepting tax returns. With the season beginning, many taxpayers will be seeking advice on how to reduce their taxable income. After all, the more deductions you can legally generate, the lower your taxable income will be and fewer taxes will be paid (or owed).
In the midst of finding deductions, many may lose sight of earning nontaxable income. Indeed, there are ways to do this, and this post will highlight a few of them.
Receiving an inheritance – Indeed, many people will not receive an inheritance every year because it comes with the unfortunate happening of a loved one passing away. However, receiving a bequest or promise of property based on a valid will is generally not considered taxable income.
Online fundraising campaigns – If you raised money for a particular cause through online platforms such as GoFundMe.com, this may also be exempt from taxable income. Of course, there may not be a business purpose attached to the funding, and the money received cannot be in exchange for products or services.
Selling a home – You may also avoid capital gains taxes when you sell your home if you meet certain criteria. If you have lived in the home for at least two of the five years preceding the sale or if you are using the proceeds to purchase another home, chances are that you will not owe taxes on the sale.
The preceding is not legal advice. If you have questions about reducing taxable income, an experienced attorney can help.