Nontaxable Income

The following items are generally not reported as taxable income.

• accelerated death benefits under a life insurance contract that are paid to a terminally or chronically ill person by the insurance company or a viatical settlement company
• accident and health insurance benefits
• black lung benefits
• cash rebates (for example, you receive $500 after purchasing a new car)
• casualty insurance and other reimbursements for theft or casualty loss
• child support payments
• damages for physical injury or sickness
• energy conservation subsidies provided by public utilities for purchase or installation of energy-saving devices in dwellings
• Federal Employees' Compensation Act payments
• foster-care payments, unless you are paid for care of more than five people age 19 or older, or you receive difficulty-of-care payments for more than five people age 19 or older, or more than 10 people under 19
• gifts, bequests, and inheritances
• government cost-of-living allowances for civilian employees stationed outside the continental U.S. or in Alaska
• life or accident insurance proceeds, unless the policy was turned over to you for a price. However, if you cash in a policy, you must include in taxable income any amount that exceeds the total premiums you paid less any rebates, refunds, dividends, or unrepaid loans.
• living expenses paid by insurance, because of a casualty loss to your home, to the extent the payments compensate for extra expenses you would not have had if the casualty had not occurred
• long-term care insurance benefits from qualified plans, up to $260 per day or $94,900 per year in 2007 ($270 per day or $98,820 per year in 2008).
• medical savings account withdrawals, if used to pay for qualified medical expenses for you, yourself, or your dependents (withdrawals to pay for health insurance premiums are qualified expenses only if you are unemployed, buying COBRA continuation coverage, or buying long-term care coverage)
• military allowances
• Supplemental Security Income (SSI) payments
• veterans' benefits
• welfare benefits, including disaster relief grants, mortgage assistance programs, and payments to reduce cost of winter energy
• workers' compensation