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What is taxable versus non-taxable earned income?

Taxable income includes: Salaries, wages, commissions, bonuses, tips, stipends, fees, incentive payments, employee contributions to some retirement accounts, compensation drawing accounts (if amount received as a drawing account exceeds the salary or commission, the tax is payable on the amount received. If the employee subsequently repays to the employer any amount not in fact earned, reduce the income figure accordingly), jury duty pay, military pay for services other than active duty, sick pay (if employee received a regular salary during period of sickness or disability by virtue of agreement of employment), and taxes assumed by the employer. Restricted stock unit awards are taxable at the time of vesting. Benefits accruing from employment (such as: annual leave, vacation, holiday, separation, sabbatical leave, dependent care benefits and compensation received in the form of property), shall be taxed at fair market value at the time of receipt. Deferred compensation plan distributions are typically taxable at the time and place of receipt, unless contributions were taxed previously. Some forms of early withdrawal from retirement programs are taxable. Stock options are taxable at the time of exercise. Refer to the PA Department of Revenue regulations regarding taxable compensation. This list is not exhaustive. Contact your professional tax preparer with questions.

Non-taxable income includes: Social Security benefits, Unemployment Compensation, public assistance, alimony, child support, death benefits, gifts, interest, dividends, boarding and lodging for convenience of employer, lottery winnings, Supplementary Unemployment benefits, capital gains (capital or business losses may not be used as a deduction against other taxable income), disability benefits (periodic payments received by an individual under a disability insurance plan), active military service and summer encampment (provide orders; include leave and earnings statement), personal use of company cars, cafeteria plans, and clergy housing allowance. Some forms of payments from pensions and individual retirement programs (such as: Keogh, Tax Shelter Annuity, IRA and 401K) are not taxable as earned income. Refer to the PA Department of Revenue regulations regarding taxable compensation. This list is not exhaustive. Contact your professional tax preparer with questions.

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