Page 76 - 2020 Publication 17

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Social security benefits (including Don’t include alimony payments you 5. Damages for:
lump-sum payments attributable to prior ! receive under a divorce or separation a. Patent or copyright infringement,
years), Supplemental Security Income (SSI) CAUTION agreement (1) executed after 2018, or
benefits, and lump-sum death benefits. The (2) executed before 2019 but later modified if b. Breach of contract, or
Social Security Administration (SSA) provides the modification expressly states the repeal of
benefits such as old-age benefits, benefits to the deduction for alimony payments applies to c. Interference with business operations.
disabled workers, and benefits to spouses and the modification. 6. Back pay and damages for emotional dis-
dependents. These benefits may be subject to tress received to satisfy a claim under title
federal income tax depending on your filing sta- Bribes. If you receive a bribe, include it in your VII of the Civil Rights Act of 1964.
tus and other income. See chapter 7 in this pub- income. 7. Attorney fees and costs (including contin-
lication and Pub. 915, Social Security and Campaign contributions. These contribu-
Equivalent Railroad Retirement Benefits, for tions aren’t income to a candidate unless gent fees) where the underlying recovery
is included in gross income.
more information. An individual originally de- they’re diverted to his or her personal use. To
nied benefits, but later approved, may receive a be nontaxable, the contributions must be spent 8. Attorney fees and costs relating to whistle-
lump-sum payment for the period when benefits for campaign purposes or kept in a fund for use blower awards where the underlying re-
were denied (which may be prior years). See in future campaigns. However, interest earned covery is included in gross income.
Pub. 915 for information on how to make a on bank deposits, dividends received on con-
lump-sum election, which may reduce your tax tributed securities, and net gains realized on Don’t include in your income compensatory
liability. There are also other types of benefits sales of contributed securities are taxable and damages for personal physical injury or physi-
paid by the SSA. However, SSI benefits and must be reported on Form 1120-POL, U.S. In- cal sickness (whether received in a lump sum or
lump-sum death benefits (one-time payment to come Tax Return for Certain Political Organiza- installments).
spouse and children of deceased) aren’t sub- tions. Excess campaign funds transferred to an Emotional distress. Emotional distress it-
ject to federal income tax. For more information office account must be included in the office- self isn’t a physical injury or physical sickness,
on these benefits, go to SSA.gov. holder's income on Schedule 1 (Form 1040), but damages you receive for emotional distress
Nutrition Program for the Elderly. Food ben- line 8, in the year transferred. due to a physical injury or sickness are treated
efits you receive under the Nutrition Program for Car pools. Don’t include in your income as received for the physical injury or sickness.
the Elderly aren’t taxable. If you prepare and amounts you receive from the passengers for Don’t include them in your income.
serve free meals for the program, include in driving a car in a car pool to and from work. If the emotional distress is due to a personal
your income as wages the cash pay you re- These amounts are considered reimbursement injury that isn’t due to a physical injury or sick-
ceive, even if you’re also eligible for food bene- for your expenses. However, this rule doesn’t ness (for example, employment discrimination
fits. apply if you have developed car pool arrange- or injury to reputation), you must include the
Payments to reduce cost of winter energy. ments into a profit-making business of trans- damages in your income, except for any dam-
ages that aren’t more than amounts paid for
Payments made by a state to qualified people porting workers for hire. medical care due to that emotional distress.
to reduce their cost of winter energy use aren’t Cash rebates. A cash rebate you receive from Emotional distress includes physical symptoms
taxable. a dealer or manufacturer of an item you buy that result from emotional distress, such as
Other Income isn’t income, but you must reduce your basis by headaches, insomnia, and stomach disorders.
the amount of the rebate.
Credit card insurance. In most cases, if you
The following brief discussions are arranged in Example. You buy a new car for $24,000 receive benefits under a credit card disability or
alphabetical order. Other income items briefly cash and receive a $2,000 rebate check from unemployment insurance plan, the benefits are
taxable to you. These plans make the minimum
discussed below are referenced to publications the manufacturer. The $2,000 isn’t income to
which provide more topical information. you. Your basis in the car is $22,000. This is the monthly payment on your credit card account if
you can’t make the payment due to injury, ill-
Activity not for profit. You must include on basis on which you figure gain or loss if you sell ness, disability, or unemployment. Report on
the car and depreciation if you use it for busi-
your return income from an activity from which ness. Schedule 1 (Form 1040), line 8, the amount of
you don’t expect to make a profit. An example benefits you received during the year that’s
of this type of activity is a hobby or a farm you Casualty insurance and other reimburse- more than the amount of the premiums you paid
operate mostly for recreation and pleasure. En- ments. You generally shouldn’t report these during the year.
ter this income on Schedule 1 (Form 1040), reimbursements on your return unless you’re Down payment assistance. If you purchase a
line 8. Deductions for expenses related to the figuring gain or loss from the casualty or theft.
activity are limited. They can’t total more than See Pub. 547 for more information. home and receive assistance from a nonprofit
corporation to make the down payment, that as-
the income you report and can be taken only if
you itemize deductions on Schedule A (Form Child support payments. You shouldn’t re- sistance isn’t included in your income. If the cor-
port these payments on your return. See Pub.
poration qualifies as a tax-exempt charitable or-
1040). See Not-for-Profit Activities in chapter 1
of Pub. 535 for information on whether an activ- 504 for more information. ganization, the assistance is treated as a gift
and is included in your basis of the house. If the
ity is considered carried on for a profit. Court awards and damages. To determine if corporation doesn’t qualify, the assistance is
Alaska Permanent Fund dividend. If you re- settlement amounts you receive by compromise treated as a rebate or reduction of the purchase
or judgment must be included in your income,
ceived a payment from Alaska's mineral income price and isn’t included in your basis.
fund (Alaska Permanent Fund dividend), report you must consider the item that the settlement Employment agency fees. If you get a job
replaces. The character of the income as ordi-
it as income on Schedule 1 (Form 1040), line 8.
The state of Alaska sends each recipient a nary income or capital gain depends on the na- through an employment agency, and the fee is
ture of the underlying claim. Include the follow-
paid by your employer, the fee isn’t includible in
document that shows the amount of the pay-
ment with the check. The amount is also repor- ing as ordinary income. your income if you aren’t liable for it. However, if
you pay it and your employer reimburses you
ted to the IRS. 1. Interest on any award. for it, it’s includible in your income.
Alimony. Include in your income on Schedule 2. Compensation for lost wages or lost profits Energy conservation subsidies. You can ex-
1 (Form 1040), line 2a, any taxable alimony in most cases.
payments you receive. Amounts you receive for 3. Punitive damages, in most cases. It clude from gross income any subsidy provided,
either directly or indirectly, by public utilities for
child support aren’t income to you. Alimony and
child support payments are discussed in Pub. doesn’t matter if they relate to a physical the purchase or installation of an energy con-
servation measure for a dwelling unit.
injury or physical sickness.
504.
4. Amounts received in settlement of pension Energy conservation measure. This in-
rights (if you didn’t contribute to the plan). cludes installations or modifications that are
Page 72 Chapter 8 Other Income