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LSDefine
Simple English definitions for legal terms
exempt income
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A quick definition of exempt income:
Exempt income is money that you don't have to pay taxes on. This can include things like gifts, certain types of investments, and some types of income earned by non-profit organizations. It's important to know what income is exempt so you don't accidentally pay more taxes than you need to.A more thorough explanation:
Exempt income refers to money or other forms of payment that are not subject to income tax. This type of income is not included in the calculation of taxable income. Examples of exempt income include:
- Gifts
- Child support payments
- Workers' compensation benefits
- Social Security benefits
- Veterans' benefits
For instance, if someone receives a gift from a family member, that gift is not considered taxable income and does not need to be reported on their tax return. Similarly, if someone receives Social Security benefits, only a portion of those benefits may be taxable, depending on their total income.