What Is Other Income on Form 1040?

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DEFINITION

"Other income" refers to sources of income that aren't assigned a specific line on the tax return or its accompanying Schedule 1.

Definition and Example of Other Income on Form 1040

Other income is the total of all income you receive during the year that is not wage-related. Schedule 1 is the form you use to figure out your other income. You take the amount from Schedule 1 of your other income and put that amount on line 8 on your form 1040 when you are doing your taxes.

Other income includes earnings other than wages or income from self-employment, retirement income, investments, foreign income, and canceled debts. Other income must be reported on Schedule 1 and Form 1040, and it's taxable. Below is Form 1040.

Form 1040

Who Uses Other Income on Form 1040? 

You typically 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, jury duty pay, and lottery winnings.

Additional sources of income that you might report as other income include:

  • Gambling winnings
  • 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
  • Inmate income accounts for work performed while incarcerated, such as work-release programs

You might receive a 1099 Form for some of these sources of income, but they're still reported as other income.

Cancellation of Debts

A debt is canceled when you owe a lender money, and you default on repayment, so the lender eventually writes off the balance as uncollectible. You no longer owe it, but the IRS considers it income to you since you don't have to repay it.

The lender typically reports canceled debt on Form 1099-C and then submits the form to the IRS and sends a copy to you. It's reportable as other income if you were solvent at the time the debt was forgiven—that is if the value of your assets was more than the total of your liabilities.

The IRS provides an insolvency determination worksheet to help you determine whether you were solvent.

Foreign Income

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, and 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. Complete Form 2555 with your tax return to exclude your foreign income. The IRS provides instructions along with the qualifying criteria for claiming an exclusion.

Exceptions to 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.
  • Thanks to the Tax Cuts and Jobs Act (TCJA), alimony received no longer has to be claimed as income. It has its own line on Schedule 1 (line 2a) when it's payable from a qualifying divorce that occurred prior to 2019.
  • Roth retirement plan qualified distributions or distributions returned from contributions aren't taxed, because contributions are made with after-tax dollars.
  • Gifts might be taxable, but the donor is responsible for paying this tax, not the recipient.

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-NEC forms to non-employees who earned $600 or more during the tax year.

Self-employment income was previously reported on Form 1099-MISC but is now reported on Form 1099-NEC, which stands for "nonemployee compensation."

Earnings for which you don't receive a Form 1099-NEC are considered income for tax purposes and must be reported on Schedule C, although not as other income. Not receiving a 1099-MISC could be an oversight on the part of the payer, or it could simply mean that a 1099-MISC wasn't required because you earned less than the $600 threshold. The income is still taxable.

How to Fill Out Other Income on Form 1040

Other income is reported on line 8 of Schedule 1 of Form 1040, a few other adjustments are made, and then the total from line 10 of Schedule 1 is transferred to line 8 of Form 1040 itself. These lines pertain to forms for the 2021 tax year, the return you'd file in 2022.

The IRS requires that you detail the “type and amount” of your other income 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, too many to detail in the allotted space.

Key Takeaways

  • Other income on Form 1040 refers to income that isn't assigned a specific line on a 1040 tax return or Schedule 1 form.
  • You typically have to report other income if you receive money or goods that aren't included on a W-2 or most 1099s.
  • Canceled debts and foreign income are typically reported as other income. 
  • Child support, alimony, Roth IRA distributions, gifts, and self-employment income aren't reported as other income. 
  • You report other income by filling in line 10 on Schedule 1 and transferring the total to line 8 on Form 1040. 

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