Other Income: Form 1040 Line 7a and Schedule 1
Report "Other Income" on Form 1040 Schedule 1
“Other income” sounds like something we’d all love to have—extra money streaming into our households to spend as we see fit. In tax terms, this isn't far off. Other income is "extra" money. It's taxable income that isn't assigned a specific line of its own on the 1040 tax return or Schedule 1. It's earnings other than wages or income from self-employment or investments.
These are typically one-and-done payments made to you for one reason or another that aren't likely to be repeated multiple times during the tax year. And yes, this money is taxable.
Examples of Other Income
You’ll probably have to report other income if you receive money or goods that aren't included on a W-2 or on most 1099s. Think prizes, awards, Alaska Permanent Fund dividends, jury duty pay, and lottery winnings.
Some of these sources of income will indeed result in you receiving a 1099 of one type or another, but they're still "other income."
Additional sources of income that you might report as other income include:
- Cash earned from odd jobs
- Barter exchanges—the value of goods or services exchanged
- Dividends on insurance policies if they exceed the premiums you paid
- Cash for keys
- Recaptures of deductions you erroneously claimed on past tax returns
- Reimbursements for previously deducted expenses
- The taxable portions of disaster relief payments
- Distributions from a Coverdell education savings account (ESA) or a qualified tuition program (QTP)
- Inmate's income accounts for worked performed while incarcerated, such as work release programs
Cancellation of Debts
Cancellation of a debt is what happens when you owe a lender money and default on repayment, and the lender eventually writes off the balance as uncollectible. You no longer owe it, but the IRS says it's income to you if you don't have to repay it.
Cancelled debt is typically reported by the lender on Form 1099-C, then submitted to the IRS with a copy sent to you. It's reportable as other income if you were solvent at the time the debt was forgiven—the value of your assets was more than the total of your liabilities.
The IRS provides an insolvency determination worksheet to help you determine if you were solvent.
The IRS says you must include foreign income as other income even if you paid taxes on it to another country. Convert the total to U.S. dollars, then enter the U.S. figure on your tax return as other income.
You might be eligible to exclude some or all of this income from your taxable income, however. Qualifying rules include:
- You're not an employee of the U.S. government or a member of the Armed Forces.
- You're not claiming the foreign tax credit or the earned income tax credit.
- Your foreign earnings did not source from a U.S. territory or possession.
What Isn't Other Income?
Child support, Roth IRA distributions, gifts, and inheritances are exceptions to the other income rule.
- Child support is tax-neutral. It’s neither deductible to the parent paying it nor reportable by the parent receiving it.
- Alimony received was reported elsewhere on Form 1040 through tax year 2018, and it no longer has to be claimed as income beginning in 2019.
- Roth retirement plan distributions aren't taxed because contributions were made with after-tax dollars.
- Gifts might be taxed, but the donor is responsible for paying this tax, not the recipient.
- The federal government doesn't impose an inheritance tax.
- Fees received for serving as a notary public aren't considered other income.
Self-Employment Income Isn't Other Income
You wouldn't report self-employment income as other income, either, even if you don’t receive a 1099-MISC for payments and compensation you received. This income is reported on Schedule C, Profit or Loss From Business, if you're an independent contractor or sole proprietor. Businesses are required to issue 1099-MISC forms for aggregate payments of $600 or more during the tax year.
Earnings for which you don't receive a Form 1099-MISC are nonetheless considered income for tax purposes and must be reported on Schedule C, although not as other income. Not receiving a 1099-MISC is either an oversight on the part of the payer or it simply means that a 1099-MISC was not required because you earned less than the $600 threshold. The income is still taxable to you.
How to Report Other Income
Other income is reported on line 8 of Schedule 1 of the 2019 Form 1040, then the total from line 9 of Schedule 1 is transferred to line 7a of the 1040 itself. These lines pertain to the tax return you'll complete in 2020 for the 2019 tax year.
The 2018 Form 1040, which was filed in 2019 for the 2018 tax year, is significantly different from the one you used for tax year 2017, which you filed in 2018. And the 2019 Form 1040 is different still. Virtually all information is entered on different schedules and lines than in tax years 2017 and earlier.
The IRS requires that you list “type and amount” on line 8 of Schedule 1 and enter the total. For example, you'd enter $40 and “jury duty" if you were paid $40 for performing that service.
Enter the total and attach a statement to your tax return that itemizes where the income came from if you had many sources of other income during the course of the year.
You couldn't report "other income" on Forms 1040EZ or 1040A through 2017, and these forms were repealed in the 2018 tax year in any event.