Surprise! These Are Taxable!

Surprise! These Are Taxable!

Uncle Sam is one greedy relative.

It’s bad enough that his bony hand is always in your pocket on payday, but it’s not just wages and investment income that are taxable. Anytime you come into extra cash, he’s always there with his hand out. 

Believe it or not, certain scholarship benefits are taxable. Funds that cover tuition, fees and books are safe, but if room and board, travel or other expenses are covered, those benefits must be reported as income.  Work-study awards and assistantships are also taxable, even if the money is used for tuition. 

If you get lucky in Vegas or at the track, Uncle Sam also gets a piece of the action. Winnings from casinos, sports betting, horse races and lotteries are taxable. In fact, the payer will issue a Form W2-G that also goes to the IRS. The form is required if you win $1200 or more from bingo or slot machines, $1500 or more from keno, more than $5000 from poker, $600 from other types of bets, or more than 300 times your original bet. However, if you itemize deductions gambling losses can be deducted up to the amount of winnings reported as income.   And for gambling winnings, the state gets a cut too. You can’t be taxed twice, so if you pay taxes in the state where the money was won, you should receive a tax credit in your home state for the amount paid.

Let’s say you make a deal with your credit card company to pay off a certain amount of the balance with the rest forgiven (typically a measure taken for distressed accounts). You may be too broke to pay your credit card bill, but any portion of the balance that is forgiven is considered taxable income.  There are, at least, certain exceptions – for some student loans, debts discharged during a bankruptcy proceeding, and some types of farm debt. 

Uncle Sam even wants a cut of ill-gotten gains. If you rob a bank, embezzle half a million dollars from your company, or have a side hustle cooking meth, the income is taxable! While it could be a foolish criminal who reported illegal income, be prepared to pay the piper if you get caught. Tax evasion will likely be added to the criminal charges against you. 

There really is no good fortune that is sacrosanct. If you discover a chest of gold and jewels after finding a pirate’s treasure map, that will be taxable too. According to the IRS, “found property that was lost or abandoned is taxable at its fair market value in the first year it is in your undisputed possession.”

For more examples of Uncle Sam taking his cut, please visit:
10 Surprising Things That Are Taxable | Kiplinger

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