Yes, several types of income and transactions are not taxed by the IRS in the US. Major examples include financial gifts (up to a yearly limit), inheritance, child support, life insurance proceeds, and municipal bond interest. Other non-taxable items include worker's compensation, welfare benefits, and certain employer-provided health benefits.
Unemployment compensation generally is taxable. Inheritances, gifts, cash rebates, alimony payments (for divorce decrees finalized after 2018), child support payments, most healthcare benefits, welfare payments, and money that is reimbursed from qualifying adoptions are deemed nontaxable by the IRS.
Some items are exempt from sales and use tax, including: Sales of certain food products for human consumption. Sales to the U.S. Government. Sales of prescription medicine and certain medical devices.
Here are eight types of income that are free from federal taxes.
No Tax on Overtime is a provision that was included in a larger tax reform bill that passed in July 2025. It allows certain workers to deduct up to $12,500 in qualified overtime compensation from their taxable income on their federal income tax return. Joint filers can deduct up to $25,000.
Basic Groceries
Non-taxable grocery items include: Dairy products (milk, cheese, yogurt) Fresh and frozen vegetables. Meats, poultry, and fish.
The IRS does not actively monitor every Venmo account 1-(855)(518)(9622). However, Venmo may report certain transactions to the IRS if they meet federal reporting requirements 1-(855)(518)(9622). This typically applies to income-related payments, not casual personal transfers 1-(855)(518)(9622).
The "20k rule" refers to the traditional IRS threshold for reporting income from payment apps and online marketplaces on Form 1099-K: over $20,000 in gross payments AND more than 200 transactions in a calendar year. While a law (the American Rescue Plan) temporarily lowered the threshold to $600, recent legislation, the One Big Beautiful Bill Act (OBBBA) (OBBBA), has reinstated the $20,000/200-transaction rule for tax years starting in 2025, providing relief for casual sellers and gig workers.
Does Zelle Report Payments to the IRS: Form 1099-K Details. IRS Form 1099-K reports payments received for goods or services during the tax year from credit, debit, or stored value cards and TPSOs. The 2025 reporting threshold is $2,500 or more, which will be reduced to $600 in 2026.
The IRS can't seize certain personal items, such as necessary schoolbooks, clothing, undelivered mail and certain amounts of furniture and household items.
Invisible earnings are the income or receipts derived from a country's provision of services to customers or counterparties in other countries. For example, earnings from the provision of financial services including insurance. Sometimes abbreviated to invisibles.
The IRS doesn't have a specific dollar limit for hobby income; instead, it focuses on profit motive: if you intend to make a profit, it's a business, but if it's for fun, it's a hobby, and you must report all income but can't deduct losses. Key is that you report all hobby income on Form 1040 as "other income," and if net earnings from self-employment are $400 or more, you owe self-employment tax, even if it's a side gig. The main difference from business is that you can't deduct hobby expenses (under current law) and must report all profits.
The IRS allows taxpayers to deduct up to $3,000 of realized investment losses ($1,500 if married filing separately) against ordinary income each year. This deduction applies only to losses in taxable investment accounts and must be realized by December 31st to count for that tax year.
A 90-Day Letter is an IRS notice issued after an audit that highlights discrepancies in taxes. Taxpayers have 90 days to respond, or 150 days if they are abroad, to dispute the IRS claims. If you agree with the IRS findings, you must sign and submit Form 5564 to avoid penalties.
If the individual tax cuts expire, taxpayers in all income groups would face higher and more complicated taxes. Machinery and equipment expensing is a key provision that, if allowed to expire, would especially harm capital-intensive industries like manufacturing.
Your paycheck could be slightly larger in 2026 based on the latest IRS tax bracket changes. Some workers could also see withholding changes from the new provisions enacted via President Donald Trump's "big beautiful bill." But you may not feel the tax bracket updates due to current inflation, experts say.
For most married couples, filing jointly is better due to a larger standard deduction, lower tax brackets, and access to valuable credits (like Child Tax Credit), but filing separately can be advantageous if one spouse has high itemized deductions (like medical bills) or if you want to avoid joint liability for a spouse's tax issues, often making the choice dependent on your specific income levels and financial circumstances.