EACH year, millions of Americans must file state and federal taxes or face penalties.
Those who fail to file by the deadline will receive a notice or letter detailing the penalties owed and steps to pay it off.
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The IRS has already processed millions of taxes and revealed the average federal refund was $3,453 during the first four weeks of filing.
That’s a 7.5% increase from last year’s average of $3,213 within the same timeframe.
While the deadline to file your taxes is April 15, you may be exempt from claiming in a few areas.
There are eight types of income free from taxes: child support payments, disaster relief, gifts, inheritance, municipal bonds, Life insurance death benefits, profits of selling your home, and Roth IRA income.
However, we’ll focus on the five most common.
1. CHILD SUPPORT PAYMENTS
According to the IRS, child support payments are not subject to tax.
This means Americans filing their taxes are not required to include those payments as income.
Additionally, those making child support payments are not able to deduct them from their taxes.
Alimony, including separation or any maintenance payments, may be subject to tax depending on several factors so it’s best to check with a tax expert.
2. INHERITANCE
An inheritance tax is imposed when a beneficiary inherits the assets of someone who died.
This means if you have been given the inheritance, you will not owe any estate tax, as the person who has died will pay any federal or state estate taxes.
While you may not owe any estate tax at the federal level, you may have to pay state inheritance taxes.
The following six states levy an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania.
Just remember that inheritance tax is directly tied to the location where the person died.
If you live in a state with no inheritance tax but inherit money from someone who died in a state that levies an inheritance tax, you will likely owe that tax.
3. CAPITAL GAINS – HOUSING
Capital gains are any profit earned on the sale of an asset that has increased in value over time.
While you may have to pay taxes on other capital gains, selling your house is excluded from taxes – kind of.
If you sell your home and make a profit, single filers may be eligible for a tax exemption of up to $250,000.
Those who are married and file jointly are up to $500,000.
2025 Tax Season
Tax season started on January 27 and folks must have theirs completed filed on April 15.
Those who fail to file by that time may face penalties.
However, taxpayers who need more time may file for an extension – this gives them until October 15.
The way to do this is by filling out Form 4868, the Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.
This can be done by mail, online with an IRS e-filing partner, or through a tax professional.
While there’s no set schedule, the IRS revealed that taxpayers may receive refunds within 21 days of filing.
Just be sure to avoid making mistakes on any forms as that could tack on extra time.
Those filing through mail will likely get their returns within a month or could even face delays as the IRS processes millions.
As of January 31, the average refund amount totaled $1,928, per the IRS.
This is compared to the $1,395 for the same period in 2024.
The average direct deposit refund for 2025 was even higher, the IRS said, at $2,069.
To check the status of your refund, The IRS has an online tool called Where’s My Refund?
This works within 24 hours of e-filing and generally within four weeks of filing a paper return.
4. ROTH IRA
A Roth IRA is a retirement savings account where contributions are made with after-tax dollars.
This means any growth is tax-free, as well as withdrawals in retirement – given that certain conditions are met.
Contributions are made with money that has already been taxed, unlike traditional IRAs.
This means Roth IRAs, Roth 401(k)s, and Roth 403(b)s are not taxed.
Just note that to withdraw investment earnings tax-free, you must follow the Roth IRA 5-year rule.
The rule states that you must wait at least five years from the date of your first contribution or conversion to avoid taxes and penalties on withdrawals of earnings or converted funds, per Fidelity.
5. GIFTS
You will not be taxed on money that was gifted to you from family or friends.
Just note that the giver may be required to file a gift tax return for anything over $19,000.
However, they won’t be required to pay federal gift taxes until they give away millions during their lifetime.
For more information on tax exemptions, head to the IRS website.
TAXING TIMES
The IRS is urging millions of taxpayers to avoid a scam that may cost you up to $5,000 and jail time.
Additionally, there are seven ways to file your taxes for free – and important deadlines to grab your refund even faster.
