Taxes Frequently Asked Questions (FAQ’s) – Understanding What Is And Is Not Taxable

* Is Social Security retirement income taxable?

Social security retirement benefits are taxable, even though it depends on your total income and civil status. Federal law states that a person must pay taxes if he or she has an annual Social Security retirement income higher than $25,000. If the individual has a married status, then they will have to pay such taxes if the income is more than $32,000. 

However, if the Social security retirement benefits are the only source of income for the recipient, then it is rendered to be non-taxable and there is no need to file a federal income tax return. 

* Are other pension payments (not SS) taxable? 

As with Social Security benefit payments, other pension payments are taxable, although it depends on the recipient's income and marital status. If this payment is the only source of income of the individual, then it may be tax-free. Other conditions are also stipulated on the Instruction Booklet of the Internal Revenue Services (IRS), or it can be found on the IRS website. 

* Are tips taxable income? 

Tips are not taxable if they are given for a service not correlated with a taxable sale. For example, the tip that you give for carrying your luggage or cleaning your hotel room is not taxable. 

One more perfect example is when you are tipping your waiter after a meal at a restaurant.  These are examples of non taxable tips. 

However, there are taxable tips. These types of tips are called mandatory tips, and they are given on a service that is associated in taxable sale. 

An example of such a tip is the amount that you add to a certain meal or beverage (like a bottomless iced tea which you are required to add a certain amount). Such tips are printed in the restaurant's menu or placed in their advertisement, if any. 

* Is child support taxable? 

Child support is not taxable. This is neither deductible by the payor nor taxable to the payee. Subject 422 of the Non-taxable Income determined by the Internal Revenue Services (IRS) states that child support payments aren't included in taxable income. Therefore, it is not included in filing a tax return. 

* Are gifts taxable? 

Gifts are taxable. The taxable amount is based on the equivalent amount of the gift to be given. For instance, if you've given someone a cash gift that is worth $11,000.00, it has an equivalent deductible tax charged to the giver. 

However, there are also stipulations in the law which allows you to give certain amounts, even if is in cash or property, that do not have gift tax consequences. Gifts to charities or raffle draw winners have a corresponding deductible tax depending on the cash gift that they have obtained.