In general, means-tested benefit programs e.g., Temporary Aid to Needy Families (TANF), Supplemental Security Income (SSI), Food stamps, etc. are NOT taxable. Presumably, the theory is that if someone is poor enough to qualify for such benefits, it would be rather self-defeating to tax them.
Categorical benefit programs which do not require means-testing may or may not be taxable. For example, Social Security benefits may be partially taxable for some taxpayers, but not for others. Veteran's benefits are not taxable. Unemployment insurance is taxable but workers compensation is not taxable. Prizes, including the Nobel Peace Prize, are taxable income to the recipient, but gifts and inheritances are not.
The rationale for some of these distinctions is not always clear, and the tax treatment of some items have changed over time. Some of the apparently arbitrary distinctions conflict with horizontal equity and Haig-Simons definition of income considerations.
If you are not sure about whether a particular form of income is taxable, check Tab D of your Resource Guide.
No comments:
Post a Comment