Final answer:
Items subject to personal income tax include wages, salaries, business income, interest income, and unemployment compensation. Non-taxable income can include gifts, inheritance, life insurance payouts, municipal bond interest, and qualified scholarships. Understanding which types of income are taxable is essential for proper tax filing and taking advantage of tax benefits.
Step-by-step explanation:
When considering items of income in relation to personal income tax, we can distinguish between those that are taxed and those which are not. Items subject to personal income tax generally include wages, salaries, business income, interest income, and unemployment compensation. These forms of income contribute to an individual's adjusted gross income and are subject to taxation according to various tax rates and brackets. Contrarily, some items are exempt from personal income tax or are not considered taxable income. Examples of non-taxable income may include gifts, inheritance, and certain types of life insurance payouts. Additionally, municipal bond interest and qualified scholarships are often tax-exempt, providing relief in specific areas. The determination of whether income is taxable or not can depend on complex tax code regulations and eligibility for various deductions and exemptions. The understanding of this distinction is crucial when filing taxes to ensure accuracy and compliance with tax laws, as well as to take advantage of potential tax savings through deductions and exemptions.