IRS, You Can’t Touch This!
- Mauro Leos
- Feb 12
- 2 min read
Death and Taxes are inevitable, right?... Not always.
Although your wages, royalties, commissions, and part of Social Security benefits are taxable, today I cover 3 types of income which the IRS can’t touch.
Financial gifts
If you gift “too much” (i.e. above an IRS gifting limit) you will need to pay some taxes. But the tax limit for gifts in 2026 is relatively high ($19,000), which means you can give up to $19k to each friend, family member, or anyone else and not be taxed.
Even if you exceed the limit, you won’t necessarily owe tax, thanks to a high “lifetime estate and gift tax exemption” of $15 million.
Charitable gifts are usually not taxed but make sure you’re aware of the changes to charitable giving tax rules for 2026.
Life Insurance proceeds
Proceeds on life insurance received after the policyholder's death are tax-free. But interest earned on the proceeds could be taxable. Moreover, when a policyholder surrenders the policy for cash, tax rules get more complex.
A life insurance policy loan usually isn't taxable if the policy remains “in force” and your loan amount doesn't go over the amount of premiums you’ve paid. Check out this online tool by the IRS to see if your life insurance policy proceeds are taxable or not.
Alimony and Child Support
At the federal level, if you’re on the receiving end of alimony payments for a divorce made after January 1, 2019, those payments are not taxable. On the other hand, if you’re the person paying alimony, you cannot deduct those payments from your income tax.
Keep in mind that at the state level, some US states might treat alimony differently.
As for Child support, those payments aren't subject to tax.
States with Zero Income Tax
If you’re all about living in (or moving to) a state where you won't be taxed on your earned income at the state level, there are 9 states that don’t charge personal income tax — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
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