Items that aren't taxed generally fall into categories like essential groceries, prescription medications, certain financial gifts/inheritances, some educational expenses, and specific state-exempt items, but what's exempt varies significantly by income tax (IRS rules) versus sales tax (state/local rules), with sales tax exemptions focusing on necessities and income exemptions on specific payouts like child support or life insurance.
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.
Goods and services exempted from VAT are:
Items not taxed generally include most staple groceries (unprepared food), ** prescription medications**, certain essential clothing/school supplies (often during holidays), prosthetic devices, and purchases made by non-profits or governments, but this varies by location, with prepared foods, electronics, and luxuries usually taxed; look for state-specific sales tax holidays for temporary exemptions on items like clothing or emergency supplies.
Here are eight types of income that are free from federal taxes.
The GST/HST break includes certain qualifying goods, such as:
Some items are exempt from sales and use tax, including:
Fresh milk and pasteurized milk are fully exempt from GST. Further, milk products like curd, lassi, buttermilk, and paneer also are exempt from GST if sold in form apart from those pre-packaged and labeled.
Tax-exempt status may provide complete relief from taxes, reduced rates, or tax on only a portion of items. Examples include exemption of charitable organizations from property taxes and income taxes, veterans, and certain cross-border or multi-jurisdictional scenarios.
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.
Other tax-free allowances:
The State Benefits Allowance: some (not all) state benefits are tax-free. The National Lottery Allowance: winnings from the National Lottery are tax-free.
The five states with the highest average combined state and local sales tax rates are Louisiana (10.11 percent), Tennessee (9.61 percent), Washington (9.51 percent), Arkansas (9.46 percent), and Alabama (9.46 percent). Nationwide, the population-weighted average combined sales tax rate is 7.53 percent.
Tax Free is a consumption tax exemption system that applies to general stores in cities, such as department stores and shopping malls. On the other hand, Duty Free is specific to Duty Free shops located in restricted airport areas. This system exempts goods from customs duties, tobacco tax, and liquor tax, etc.
There's no limit on how much money you can give or receive as a gift! However, there are some occasions where tax may be payable, or capital gains tax (CGT) may apply. For example, in some instances when gifting property, shares or crypto assets, or when receiving money or an asset from a non-resident trust.
There are only minimal items which are not reportable for GST purposes. These include bank transfers between accounts, stamp duty, depreciation and salary/wages. These are purchases/sales that have a 0% GST rate.
Venmo automatically monitors transactions that 1-(855)(518)(9622) meet the IRS reporting threshold. For 2026, payments over $600 1-(855)(518)(9622) for goods and services must be reported to the IRS. Previously, the threshold was $20,000 1-(855)(518)(9622) and 200 transactions per year.
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.
You generally need to file a U.S. federal tax return if your gross income for Tax Year 2025 (filed in 2026) is above a certain threshold, which varies by filing status and age, for instance, $15,750 for single filers under 65, while self-employed individuals must file if they earn $400 or more in net earnings. Thresholds increase for married couples and those 65 or older, but you might still need to file to claim a refund or refundable credits even if below the income limit.