Which type of income is typically not taxable and is not included in gross income calculations?

Nontaxable income is generally considered to be income that is specifically excluded from taxation under the Internal Revenue Code. This type of income does not have to be reported on an individual's tax return and, as a result, does not count towards gross income calculations. Examples of nontaxable income can include certain gifts, inheritances, and specific types of government benefits.

On the other hand, tax-exempt income refers to income that is not subject to taxation at all, such as interest earned on certain municipal bonds. While tax-exempt income may seem similar to nontaxable income, it is categorized differently and may still need to be reported, depending on the context in which it is received.

Passive income may include earnings from rental properties or other investments where the investor isn't actively involved in the operation. Passive income can still be taxable, depending on circumstances.

Deferred income refers to earnings that an individual has not yet received and is expected to be taxed in future tax years. Common examples include contributions to traditional retirement accounts. This type of income is also included in gross income calculations when received.

Understanding the distinctions among these types of income is essential for accurate tax reporting and compliance.