7 Things You Won’t Pay Taxes on in 2023

Cropped shot of a senior couple sitting together and going through their finances at home.
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April 18 is Tax Day, but the IRS has been accepting returns since Jan. 23. In short, it’s tax season, which is one of the most stressful and confusing times of the year for millions of Americans.

Currently, the IRS Tax Code is 6,871 pages long, but agency-generated guidelines, interpretations and regulations add another 70,000 pages or so.

Considering that IRS laws are constantly changing, even tax professionals can have a hard time keeping up — and the average person doesn’t have a prayer. The good news is that most people have relatively straightforward concerns. Among the most important is what they have to pay taxes on and what they can keep for themselves.

The following is a look at the things of value that the IRS won’t take a bite from in 2023 for most people in most situations. Keep these in mind as you get ready to file your taxes.


In most cases, inheritances — whether cash, property or investments — are not taxable at the federal level.

There are, however, a few catches.

First of all, some states might levy taxes of their own on any inheritance you receive. But, more important, subsequent earnings on an inheritance — like interest income, dividends or gains from the sale of property — are subject to federal taxation. The good news is that, on the other side of the coin, you usually can deduct any losses you incur on those same items.

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Public Assistance Benefits and Other Government Payments

The IRS does not consider need-based welfare payments nor SNAP benefits to be taxable income. Other non-taxable income in this category includes payments to crime victims that are distributed as welfare payments, compensation paid to the blind and other qualifying people with disabilities and qualifying disaster-relief payments.

Rebates and Cash Back Rewards

The IRS does not tax cash rebates you receive on items you buy from retailers, dealers or manufacturers. Even better, this rule also applies to many kinds of credit card perks.

You don’t have to pay taxes on the cash value of any rewards that the IRS treats like rebates. That includes credit card points, miles and cash back — they’re beyond the reach of the Taxman because you have to make a purchase to earn them. Therefore, the government lumps them in with coupons: incentives with a cash value that you get only by buying something. Miles and points you earn by traveling are almost never taxable either.

Exceptions include sign-up bonuses or refer-a-friend bonuses that your bank offers as incentives. The IRS lumps those in with earned interest — income that must be reported and is subject to taxation.

Child Support and (Some) Alimony Payments

Child support payments are never considered taxable income for the recipient and are never tax deductible for the payer. Alimony is also not tax deductible for the payer or taxed as income for those who receive it — as long as their divorce was finalized after Dec. 31, 2018.

Scholarship Money, Depending on How You Use It

Scholarship money is not considered taxable income — with a few caveats. First, the student recipient must be a candidate for a degree at a qualifying institution. Also, the funds are only tax exempt when used for qualified expenses such as tuition, books, fees, course materials or degree-related expenses such as equipment and supplies required for classes. If recipients use the scholarship money for things like room, board and travel, the IRS does consider it taxable income, even if it directly pertains to the cost of college.

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Life Insurance Payments

Life insurance payments are not considered taxable income as long as the proceeds are benefits paid due to the death of the insured person. However, the IRS does require you to report any interest you receive on those payments as taxable income and the agency will tax any payout you receive from cashing in a life insurance policy.

Qualified Adoption Reimbursements

Tax benefits for people who adopt children include a tax credit of up to $14,890. The credit is nonrefundable; but, if it brings your tax obligation to zero, any excess can be carried over for up to five years.

On top of that, the IRS excludes money that your employer reimburses you for qualified adoption expenses from your taxable income, provided that it doesn’t exceed the amount of the credit.

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