Legal Definitions - exempt income

Exempt income refers to money or other forms of payment that are not subject toincome tax. This type of income is not included in the calculation of taxable income. Examples of exempt income include:

• Gifts
• Child support payments
• Workers' compensation benefits
• Social Security benefits
• Veterans' benefits

For instance, if someone receives a gift from a family member, that gift is not considered taxable income and does not need to be reported on their tax return. Similarly, if someone receives Social Security benefits, only a portion of those benefits may be taxable, depending on their total income.