When it comes to taxes, most people are aware that they need to report their income from a job or business. However, there are many things that you may not know are taxable. In this blog, we’ll explore some of these unexpected items that can trigger a taxable event so you won’t end up with an unexpected tax bill, or worse – a tax audit!
What is Considered Income For Tax Purposes?
Before we dive into the specific items that may be taxable, however, it’s important to have a clear understanding of what is considered income for tax purposes. Generally, any money you receive in the form of cash, checks, or even property is considered income and may be subject to taxation. This includes not only your salary or wages, but also any tips, bonuses, rental income, and even barter exchanges.
5 Things You May Not Know Are Taxable
Unfortunately, there are also several other instances where you may be on the hook for income taxes. Here are just five examples of when you’ll need to pay the IRS:
1. Fantasy Football Winnings
Fantasy football has become increasingly popular in recent years. Many people participate in leagues and compete for cash prizes. If you’re lucky enough to win some money from your fantasy football league, the IRS will want a piece of it. That’s because fantasy football winnings are considered taxable income. Whether you win a few hundred dollars or a substantial amount, you are required to report your winnings on your tax return.
2. Unemployment Benefits
Unemployment benefits are a lifeline for many individuals who have lost their jobs. Unfortunately, many people do not realize that unemployment benefits are also considered taxable income. If you receive unemployment compensation, you will need to report it on your tax return. It’s important to note that you can have federal taxes withheld from your unemployment benefits. This can help you avoid a large tax bill at the end of the year.
3. Forgiven Debt
Another tax surprise is forgiven debts. For example, if a lender forgives a portion of your debt, it’s considered taxable income by the IRS. This means that if you had $10,000 of credit card debt forgiven, you will need to report that $10,000 as income on your tax return. There are some exceptions. Certain student loan forgiveness programs are not taxable at the federal level. States, however, may still impose income taxes on the forgiven debt. Be sure to check with a tax professional to verify your forgiven debt is exempt from taxes or you may get hit with an unexpected tax bill.
4. Found Treasures
Discovering a hidden treasure can be an exciting experience, but you may have to pay taxes on your newfound wealth. If you find valuable items, such as gold coins or antiques, and decide to sell them, you will need to report any profit you make as income on your tax return. Additionally, if you find a substantial amount of money and are unable to locate the rightful owner, you may need to report it as income as well.
5. Jury Duty Pay
If you’re called to do your civic duty and sit on a jury, don’t forget to report your earnings on your tax return. Although it will likely be a minimal amount ($15 a day in Florida for the first three days and $30 per day for any additional days), it’s still considered taxable income.
While fantasy football winnings and jury duty pay are some of the more surprising taxable items, other things are taxable, too. For example, gambling winnings, cryptocurrency earnings, and even some legal awards must be claimed when filing. It’s important to carefully review the IRS guidelines and consult with a tax professional if you have any doubts about whether or not an item is taxable.
Remember to keep detailed records and stay informed about any changes in tax laws. Also, consult with a tax professional when necessary. By taking these steps, you can manage your taxes effectively and navigate the complexities of the tax system with confidence.