Key Takeaways
- Other income on Form 1040 refers to income that isn't assigned a specific line on a 1040 tax return or Schedule 1 form.
- You typically have to report other income if you receive money or goods that aren't included on a W-2 or most 1099s.
- Canceled debts and foreign income are typically reported as other income.
- Child support, alimony, Roth IRA distributions, gifts, and self-employment income aren't reported as other income.
- You report other income by filling in line 10 on Schedule 1 and transferring the total to line 8 on Form 1040.
How Other Income on Form 1040 Works
Other income is the total of all income you receive during the year that is not wage-related. Schedule 1 is the form you use to figure out your other income. You take the amount from Schedule 1 of your other income and put that amount on line 8 on your form 1040 when you are doing your taxes.
Other income includes earnings other than wages or income from self-employment, retirement income, investments, foreign income, and canceled debts. Other income must be reported to the Internal Revenue Service (IRS) on Schedule 1 and Form 1040, and it's taxable. Below is Form 1040.
:max_bytes(150000):strip_icc()/Screenshot2023-02-16at3.02.14PM-eadaca61eec845078129d79f12ca17a4.png "What Is Other Income on Form 1040? (1)")
Who Uses Other Income on Form 1040?
You typically have to report other income if you receive money or goods that aren't included on a W-2 or on most 1099s. Theses might include prizes, awards, jury duty pay, and lottery winnings.
Additional sources of income that you might report as other income include:
- Gambling winnings
- Dividends on insurance policies if they exceed the premiums you paid
- Cash for keys
- Recaptures of deductions you erroneously claimed on past tax returns
- Reimbursem*nts for previously deducted expenses
- The taxable portions of disaster-relief payments
- Inmate income accounts for work performed while incarcerated, such as work-release programs
You might receive a 1099 Form for some of these sources of income, but they're still reported as other income.
Cancellation of Debts
A debt is canceled when you owe a lender money but you default on repayment, so the lender eventually writes off the balance as uncollectible. You no longer owe it, but the IRS considers it income to you since you don't have to repay it.
The lender typically reports canceled debt on Form 1099-C and then submits the form to the IRS and sends a copy to you. It's reportable as other income if you were solvent at the time the debt was forgiven—that is, if the value of your assets was more than the total of your liabilities.
Tip
The IRS provides an insolvency determination worksheet to help you determine whether you were solvent.
Foreign Income
The IRS says you must include foreign income as other income even if you paid taxes on it to another country. Convert the total to U.S. dollars, and then enter the U.S. figure on your tax return as other income.
You might be eligible to exclude some or all of this income from your taxable income, however. Complete Form 2555 with your tax return to exclude your foreign income. The IRS provides instructions along with the qualifying criteria for claiming an exclusion.
Exceptions to Other Income
Child support, Roth IRA distributions, gifts, and inheritances are exceptions to the other income rule.
- Child support is tax-neutral. It’s neither deductible to the parent paying it nor reportable by the parent receiving it.
- Alimony you've received does not have to be claimed as income. It has its own line on Schedule 1 (line 2a) when it's payable from a qualifying divorce that occurred prior to 2019.
- Qualified distributions from a Roth retirement plan or distributions returned from contributions aren't taxed, because contributions are made with after-tax dollars.
- Gifts might be taxable, but the donor is responsible for paying this tax, not the recipient.
You wouldn't report self-employment income as other income, either, even if you don’t receive a 1099-MISC for payments and compensation you received. This income is reported on Schedule C, Profit or Loss From Business if you're an independent contractor or sole proprietor. Businesses are required to issue 1099-NEC forms to non-employees who earned $600 or more during the tax year.
Note
Self-employment income was previously reported on Form 1099-MISC but is now reported on Form 1099-NEC. NEC stands for "nonemployee compensation."
Earnings for which you don't receive a Form 1099-NEC are considered income for tax purposes and must be reported on Schedule C, although not as other income. Not receiving a 1099-MISC could be an oversight on the part of the payer, or it could simply mean that a 1099-MISC wasn't required because you earned less than the $600 threshold. The income is still taxable.
How To Fill Out Other Income on Form 1040
Other income is reported on line 8 of Schedule 1 of Form 1040, a few other adjustments are made, and then the total from line 10 of Schedule 1 is transferred to line 8 of Form 1040 itself. These lines pertain to forms for the 2022 tax year, the return you file in 2023.
The IRS requires that you detail the “type and amount” of your other income on line 8 of Schedule 1 and enter the total. For example, you'd enter $40 and “jury duty" if you were paid $40 for performing that service.
Enter the total, and attach a statement to your tax return that itemizes where the income came from if you had many sources of other income during the course of the year, too many to detail in the allotted space.
Frequently Asked Questions (FAQs)
On which line do I report other income on Form 1040?
You'll enter the total of your other income on Line 8 of Form 1040. Don't forget to fill out Schedule 1 first to find the correct figure. Schedule 1 helps you total all of your other income and make any necessary adjustments.
Does self-employment income count as other income?
No, any income you earn working for yourself, whether through freelancing, gig work, or a side hustle, is reported as self-employment income, not other income. Report your self-employment income on Schedule C, Profit or Loss from Business (Sole Proprietorship). Use Schedule SE to figure out your self-employment taxes.
As an enthusiast and expert in taxation, particularly in the realm of Form 1040 and Schedule 1, I bring a wealth of knowledge to shed light on the intricacies of reporting other income. I've extensively navigated the tax landscape and have a firm grasp of the regulations surrounding income reporting to the Internal Revenue Service (IRS).
Let's dive into the key concepts covered in the provided article:
1. Other Income on Form 1040: Overview
Other income on Form 1040 refers to income that doesn't fit into specific lines on a 1040 tax return or Schedule 1 form. This includes various types of earnings not related to wages.
2. Reporting Other Income: General Guidelines
You're required to report other income if you receive money or goods not listed on a W-2 or most 1099s. Notable exclusions from other income reporting are child support, alimony, Roth IRA distributions, gifts, and self-employment income.
3. How to Report Other Income: Schedule 1 and Form 1040
Other income is reported by filling in line 10 on Schedule 1 and transferring the total to line 8 on Form 1040. Schedule 1 is used to calculate and itemize other income, which is then reflected on the main tax form.
4. Types of Other Income
Other income encompasses various sources, such as gambling winnings, dividends on insurance policies exceeding premiums, cash for keys, recaptures of erroneously claimed deductions, reimbursem*nts for deducted expenses, taxable portions of disaster-relief payments, and inmate income from work performed while incarcerated.
5. Cancellation of Debts as Other Income
Debts canceled by lenders are considered other income. If you were solvent at the time of debt forgiveness, the canceled debt is reported as other income on Form 1099-C.
6. Foreign Income Reporting
Foreign income must be included as other income, even if taxes were paid to another country. The conversion to U.S. dollars is necessary, and exclusions may apply based on eligibility, reported through Form 2555.
7. Exceptions to Other Income Reporting
Certain types of income are exceptions to the other income rule, including child support, alimony, Roth IRA distributions, gifts, and inheritances. These items are reported separately or are tax-neutral.
8. Self-Employment Income
Self-employment income is not reported as other income. Instead, it is reported on Schedule C, Profit or Loss from Business, for independent contractors or sole proprietors.
9. How to Fill Out Other Income on Form 1040
Other income is reported on line 8 of Schedule 1, and the total from line 10 of Schedule 1 is transferred to line 8 of Form 1040. The IRS requires a detailed breakdown of the type and amount of other income on this line.
10. FAQs: Clarifying Common Questions
The FAQs address common queries, such as where to report other income on Form 1040 (Line 8) and explicitly state that self-employment income is not considered other income but should be reported on Schedule C.
In conclusion, understanding the nuances of reporting other income is crucial for accurate tax filings, and the provided information offers a comprehensive guide to navigating this aspect of Form 1040 and Schedule 1.
