E.42 Tax implications of special circumstances Flashcards

Disability income is generally taxable if paid by an employer but tax-free if paid from an individually funded policy.

For divorce agreements finalized after 2018, alimony payments are not deductible by the payer and are not taxable to the recipient.

A tax provision that relieves one spouse from liability for errors or fraud committed by the other spouse on a joint tax return.

When a lender forgives debt, the amount canceled is generally taxable as ordinary income unless an exclusion applies (e.g., insolvency or bankruptcy).

Gambling winnings are fully taxable as income, while losses can only be deducted up to the amount of winnings if itemized.

Settlements for physical injury or sickness are tax-free, while awards for emotional distress, punitive damages, and lost wages are generally taxable.

Scholarships and grants used for tuition, fees, and required expenses are tax-free, but amounts used for room and board are taxable.

Allows U.S. taxpayers living abroad to exclude a portion of their foreign earnings from U.S. income tax, subject to residency and physical presence tests.

Depending on total income, up to 85% of Social Security benefits may be taxable for individuals and couples with higher income levels.