Wiley Tax Preparer: A Guide to Form 1040

CHAPTER 10

Other Types of Income

All income, from whatever source, is included in gross income unless there is a special rule that makes the income partially or fully excludable.

This chapter covers other types of income, such as alimony, taxable recoveries, income from S corporations and partnerships, and unemployment compensation that are reported on their own lines on the return but have not been discussed in a previous chapter.

However, there need not be a specific line on the tax return or a specific information document reporting the income in order for income to be taxable. Some of the most common types of taxable “other income” are income from cancellation of debt, gambling winnings, and jury duty pay. Line 21 on Form 1040, U.S. Individual Income Tax Return, is the line where most “other income” is reported.

Some types of income are specifically treated as tax free, including gifts and inheritances, life insurance proceeds from the death of the insured, and child support.

Scholarships and Grants

A scholarship or fellowship grant generally is not taxable if received by a taxpayer who is a candidate for a degree and if used for qualified education expenses. Qualified education expenses include:

• Tuition and fees
• Supplies and books if required by the institution for all students enrolled in the course

Room and board, travel, and equipment (that is not required for enrollment or attendance at the institution) are not qualified education expenses. Scholarships are taxable ...