Where Is Non-Taxable Income on a Form 1040?
Understand the rules for non-taxable income. While often excluded from Form 1040, some items must be reported to calculate tax or for informational filing.
The question of where non-taxable income appears on a Form 1040 is a common one, and the direct answer is that it generally doesn’t. The U.S. Individual Income Tax Return, Form 1040, is designed to calculate your tax liability based on your taxable income. By definition, non-taxable income is money or benefits you receive that are not subject to federal income tax and are excluded from this calculation. This means that for many types of non-taxable income, you will not find a specific line on Form 1040 to report them.
Common Income Not Reported on Form 1040
Certain types of income are entirely non-taxable at the federal level and are not reported on your Form 1040. A common example is money or property received as a gift or an inheritance, as the recipient does not owe income tax on the value received. The person giving a gift may need to file a separate gift tax return (Form 709) if the value exceeds the annual exclusion amount—$18,000 for 2024 and $19,000 for 2025—but this is a requirement for the donor.
Child support payments are not considered taxable income to the parent who receives them, and these payments are not reported on the recipient’s tax return. Conversely, the parent who pays the child support cannot deduct the payments. Life insurance proceeds paid to a beneficiary because of the insured person’s death are also received income-tax-free and do not need to be reported. Other non-taxable funds omitted from Form 1040 include most welfare benefits, compensatory damages for physical injury or sickness, and cash rebates from manufacturers or dealers.
Income With Non-Taxable Portions Affecting Form 1040
Some income sources are more complex because they may be partially taxable, requiring them to be addressed on Form 1040 to determine the final taxable amount. Social Security benefits are a primary example of this situation. The total amount of benefits you receive, as reported on Form SSA-1099, is entered on Line 6a of Form 1040.
To determine the taxable portion, you must complete a worksheet found in the Form 1040 instructions. This calculation depends on your “provisional income,” which includes your modified adjusted gross income plus one-half of your Social Security benefits. Depending on this total and your filing status, anywhere from 0% to 85% of your benefits could be taxable. The final taxable amount, if any, is then entered on Line 6b of Form 1040.
State and local tax refunds can also fall into this category. If you claimed the standard deduction on your federal return in the year you paid the state or local taxes, your refund is not taxable. A refund may be taxable if you itemized deductions in the prior year and received a tax benefit from deducting the state and local taxes. In that case, the taxable portion of the refund is reported as “Other income” on Schedule 1 of Form 1040.
Non-Taxable Income Requiring Separate Informational Forms
Certain non-taxable income streams do not generate a tax liability but still require you to file specific informational forms with the IRS, and failing to file can result in penalties. An example is the Foreign Earned Income Exclusion, which allows U.S. citizens and residents living abroad to exclude a portion of their foreign earnings from U.S. income tax ($126,500 for 2024). To claim this exclusion, you must file Form 2555, Foreign Earned Income, with your Form 1040.
Another instance involves receiving large gifts or bequests from foreign sources. While gifts are not taxable to the recipient, if you are a U.S. person who receives foreign gifts or bequests above certain thresholds, you must report them to the IRS. If you receive more than $100,000 from a nonresident alien individual or a foreign estate, you are required to file Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. This form is informational and does not mean you owe tax on the gift, but the penalties for failing to file Form 3520 when required can be significant, potentially reaching up to 25% of the amount of the foreign gift.