Other Taxable Income

Other Taxable Income

Interest and dividend income

Do you have to report a state income tax refund?

Tax consequences of alimony

Tax arbitrage and alimony

Is my pension taxed?

Interest and dividend income

Your bank or mutual fund reports this income on form 1099-INT or 1099-DIV

"Interest" from a money market mutual fund is actually dividend income

Report on Schedule B if total is more than $400

Do you have to report a state income tax refund?

Depends on whether or not you itemized the previous year

Don't report if you took standard deduction last year

Do report if you itemized last year

Tax consequences of alimony

Alimony received is income to recipient

Counted as earned income for purposes of IRA contribution

Alimony paid is a deduction to the payer

Tax arbitrage and alimony

If the ex-spouses have different marginal rates, there's an incentive to turn property settlements into alimony payments

Creates tax arbitrage opportunity

IRS creates complex recapture rules to prevent this

We'd probably all be better off under a flat tax system that removes the incentive to get involved in tax arbitrage

Is my pension taxed?

In most cases, yes

You should receive a 1099-R showing your reportable income from a company pension, IRA or similar retirement account