Which is a non-taxable source of income?

Which is a non-taxable source of income?

• A. Alimony
• B. Wages
• C. Child Support Payments
• D. Interest Income

Answer: (C)

Understanding which income sources are taxable vs. non-taxable helps you see why this choice fits. Wages are compensation for work and are taxed as ordinary income. Interest income is also taxable. Alimony has historically been taxable to the recipient and deductible by the payer, though the rule changed for divorces finalized after 2018. Child support payments, on the other hand, do not count as income to the recipient and are not deductible by the payer. Because child support is not subject to income tax, it is the non-taxable source of income among these options.

Understanding which income sources are taxable vs. non-taxable helps you see why this choice fits. Wages are compensation for work and are taxed as ordinary income. Interest income is also taxable. Alimony has historically been taxable to the recipient and deductible by the payer, though the rule changed for divorces finalized after 2018. Child support payments, on the other hand, do not count as income to the recipient and are not deductible by the payer. Because child support is not subject to income tax, it is the non-taxable source of income among these options.