Examples of Items Excluded from a Taxpayer’s Gross Income

A large source of the federal government’s income tax revenue is raised through Internal Revenue Code Section 61’s wide-sweeping language. In addition, Code Sections 71-90 list specific forms of income that are to be included in a taxpayer’s “gross income.” But which types of income are excluded from gross income calculation?

Code Sections 101-140 list numerous forms of income which the IRS does not subject to the income tax. Notable omissions from a taxpayer’s gross income include:

-Gain from Sale of Principal Residence (Section 121)
-Certain Death Benefits (Section 101)
-Gifts and Inheritances (Section 102)
-Certain Forgiven Debt Income (Section 108)
-Qualified Scholarships (Section 117)
-Certain Military Benefits (Section 134)
-State/Local Bond Interest (Section 103)
-Certain Employer-provided Fringe Benefits (Section 132)
-Injury /Sickness Compensation (Section 104)
-Amounts Received (and Employer Contributions) under Accident and Health Plans (Sections 105-106)
-Improvements by Lessee on Lessor’s Property (Section 109)
-Employer-provided Educational Assistance (Section 127) and Dependent Care (Section 129) Programs
-US Bond Income used to pay Higher Education Tuition (Section 135)

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