What Government Benefits Are Federally Taxable?

While millions of Americans receive government benefits every month, many people are surprised to learn that most types of federal government benefits are subject to income tax. It is generally safe to assume that your benefits will be taxable for the purpose of the federal income tax - because you are receiving something of monetary value.

Social Security Benefits and Federal Income Tax

Social Security taxes have been taxable since 1983. However, social security benefits are only taxable when certain conditions are met. For example, individuals that receive Social Security benefits and earn less than $25,000 a year are exempt from federal income tax on their Social Security benefits. Likewise, married couples that file jointly and earn less than $32,000 per year are excluded from paying federal income taxes on their social the Social Security benefits as well.

However, for the purposes of determining taxable income, Social Security benefits are treated like any other type of income. Therefore if other types of income increase your taxable income in excess of the maximum levels, you will be required to pay income tax on your benefits.

Unemployment Benefits

Unemployment benefits are considered to be earned wages by the federal government, and the Internal Revenue Service assesses income tax on them accordingly. If you are eligible to receive unemployment benefits, you may have the option of having 10% of your unemployment check deducted for income tax purposes in order to avoid year-end filing requirements. Otherwise, you'll be required to pay income taxes on the amount of benefits you receive during the tax year.

Government Retirement and Pensions

If you serve for many years in government service, your pension or retirement pay will be subject to federal income taxes. In some cases your pension, or retirement pay, will be fully taxed To find out more information about your pension and taxes, visit the IRS website and download IRS Topic 10. IRS Topic 10 explains in detail what parts of your pension or retirement pay are subject or exempt to federal income tax.

Other Taxable Benefits

If you receive other types of fringe benefits from the US government, these benefits may also be considered taxable earned wages. Furthermore, depending upon the value of the benefits, you may be required to report them as earned income and pay federal income tax on them. For example, if the government pays for certain types of pleasure travel, provides tickets to certain events or puts you up in a hotel, these benefits may be declared as earned wages and you may have to pay taxes on them.

If you are uncertain if the benefits you receive from the United States government or taxable or not, you should contact the IRS because they are the only people who will be fully capable to offer advice. However, with the exception of certain benefits such as welfare and food stamps, it is generally safe to assume that your benefits will be taxable for the purpose of the federal income.

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