Even if it’s not calculus to everyone, taxable income can still challenge you.

Many people underestimate how broad taxable income really is. It’s easy to assume it only applies to your regular salary, but in reality, the Internal Revenue Service (IRS) considers many other types of earnings taxable as well. This includes income from freelance work, online sales, investments, and even canceled debts.

The rules around this can feel confusing, especially if you’re managing multiple income sources or filing taxes on your own for the first time. To make things easier, we’ve compiled a clear breakdown of the categories of income that may count as taxable. This way, you won’t be caught off guard when tax season arrives.

Types of Taxable Income

According to the IRS, most income (whether in the form of money, property, goods, or services) is taxable unless it’s specifically exempted by law.

Here’s a quick overview of the most common types:

1. Employee Compensation

This includes wages, salaries, tips, commissions, and bonuses reported on your W‑2 form. Certain fringe benefits (non-wage compensations) like a company car are taxable, too. 

2. Business and Freelance Earnings

The income you make from selling goods, renting out property, or providing services outside a traditional job is taxable. You can deduct related expenses, but the income itself must be reported.

Bartering (trading goods or services) is also considered taxable based on the value of what you receive.

3. Investment Income

This category includes dividends, interest from bank accounts, capital gains from selling stocks or property, and cryptocurrency earnings.

4. Partnership Income

Partnerships don’t pay income tax directly. Instead, income, losses, deductions, and credits are passed through to the partners based on their share in the partnership. You must report your share on your tax return, even if you didn’t actually receive the money. 

Other types of taxable income include:

• Alimony (for divorces finalized before 2019)
• Gambling winnings
• Canceled or forgiven debt (in some cases)
• Prizes or awards, like cash from a contest
• Unemployment benefits
• Royalties from intellectual property (such as copyrights and patents) and oil, gas, and mineral properties
• Retirement plan distributions, pensions, or annuities
• S corporation income
• Court awards and damages
• Up to 85% of your Social Security benefits

For the complete list of taxable and non-taxable income types, see IRS Publication 525. 

What’s Not Taxable

Not all income is taxable. A bit of relief, right?

Kinds of income that the IRS doesn’t count as taxable include:

1. Gifts, inheritances, and bequests
2. Child support payments
3. Life insurance proceeds
4. Fringe benefits like health insurance
5. Workers’ compensation benefits
6. Scholarships used for qualified education expenses like tuition and required fees
7. Most personal injury settlements
8. Welfare payments such as food stamps and housing aid