The Internal Revenue Service (IRS) likes to cast a wide net, as they say, when it comes to which sources of income are considered taxable.
According to USA Today, this includes traditional things like wages from an employer, but also the value of the items received as a barter exchange even if no cash changes hands.
Luckily, there is plenty of money that the government cannot touch and some of it comes from places not often considered during tax time. Here are a few examples from the IRS broken down by category:
Money received due to misfortune
Worker's Compensation – Any money received from an employer for a workplace-related injury is tax-exempt.
Life insurance payments – Payments made to the recipient of a policy because of death the award is tax-free.
Inheritances – According to Investopedia: If you are the beneficiary of an estate that falls into the tax-exempt category (an estate worth less than $5.49 million in 2017, for example), you'll get all income tax free. And if you inherit an estate worth more than the exemption, you'll still get the exempt amount tax free.
Income earned after an inheritance from assets such as a dividend-paying stock will be taxed in the future.
Earnings that do not count as wages
Municipal Bonds – Because municipal bonds are necessary to help build infrastructure in their state of origin; the federal government does not tax profits from these assets. If the owner resides in the bond's state of origin, then they likely will not have to pay state taxes either!
Social Security – If this is the sole source of income, social security is almost never taxed. Be careful, though, as a part-time job or investment earnings could trigger the ordinary income tax rate on these earnings.
Education
Employer Assistance – Up to $5,250 of compensation from an employer is exempt from taxes.
Scholarships – Although money used for room and board are taxed, anything used for school-related costs such as tuition and books is considered tax-exempt.
It definitely pays to ensure that nontaxable income is not being falsely reporting while filing taxes.