10 Types of Income the IRS Will NOT Tax in 2023 (Thankfully!)

Cashback credit card rewards and health-care costs are just two of the surprising items that aren’t taxable.
Updated March 14, 2023
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Whether you're brand new to filing your own taxes or a seasoned professional looking for ways to increase personal tax savings, understanding what income the IRS doesn’t tax can be very helpful.

Here are 10 items you won't have to pay taxes on in 2023. (Which means you could have a bigger return, and more opportunity to help your return grow.) 

Child support and some alimony payments

Jacob Lund/Adobe smiling man playing with his kid outdoors

Good news for divorced couples: You don't have to pay taxes on child support payments or some alimony payments. If child support payments are a requirement of the divorce settlement, they are not considered taxable income by the IRS. This means that you won't have to pay any federal or state taxes on your child support payments, provided you still meet the requirements of your original agreement.

Alimony is a bit more complicated. Alimony payments made according to divorce decrees finalized after January 1, 2019, aren't taxed as income for the receiving party. However, if your divorce was finalized before 2018, then you may still be liable for paying taxes on alimony you receive from your ex-spouse. So if you have alimony payments, be sure to double-check the date of your decree and find out if those payments will be tax-free in 2023.


Thitiphat/Adobe female lawyer  discussing negotiation legal case with client

If you received an inheritance in 2023, then rejoice. Because whatever it is that you inherited won't be subject to taxation. There will be no need to worry about dealing with complex tax forms or seeking out a qualified accountant to help make sure your return is as accurate as possible.

Inheritance tax laws vary from state to state and can be quite confusing for the average person. The good news is that in 2023, all inheritances in the U.S. will enjoy exemption from taxation (except for 6 states) which means more money in your pocket.

Rebates and cashback rewards from credit cards

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Rewards programs are more popular than ever, especially with offers for the best cashback credit cards. In fact, many credit card issuers now offer rewards cards with huge cash back bonuses just for signing up. With these cards, you can earn anywhere from 1% back on purchases to 5% back when you shop at certain merchants. Some even offer 0% intro APR promotions and no foreign transaction fees.

But here’s the best part: You don’t have to pay taxes on your cash back or rebates. That means all of those points, miles, and rewards can be used for whatever you like, without worrying about a tax bill at the end of the year.

Life insurance payouts

thodonal/Adobe life insurance

In 2023, you won't have to pay taxes on life insurance payouts. This means that if someone in your family was insured and you receive a payout upon their passing, you can rest assured knowing that the entirety of the payout is yours to keep.

This is a major benefit for those who are receiving life insurance payouts, especially at an already emotionally taxing time. Plus, not having to worry about additional taxes takes off some of the financial strain.

Olympic and Paralympic medals and USOC prize money

Jacob Lund/Adobe athletes celebrating winning gold

If you're an Olympic or Paralympic athlete, you know that it's a long road to the top. It takes years of hard work, dedication, and money to make it as an elite athlete. But all that effort might just pay off because U.S. Olympic and Paralympic medals and USOC prize money are exempt from taxes.

That's right: Your gold, silver, or bronze medal at the next Olympics won't trigger a tax bill come April 15th. The same goes for any bonus cash you win from the United States Olympic Committee (USOC). So if you ascend the podium with Team USA, your success can be yours to keep, without Uncle Sam taking a cut.

Qualified adoption expenses

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Adopting a child can cost anywhere from four to six figures, depending on the circumstances. The IRS provides a tax credit for qualified adoption expenses, but the rules are complex and families who are adopting should probably seek the help of a tax expert.

Qualified adoption expenses include attorney fees, court costs, travel expenses associated with the adoption process (such as airfare or hotel fees), agency fees, medical expenses related to the health of your adopted child, and more.


zimmytws/Adobe scholarship cap on money

Scholarships aren’t taxed as long as they are used for qualifying education costs. You can rest easy knowing that any scholarship money you receive or give will not be taxed this year.

If you're a student looking to fund your college education through scholarships, then this is great to know. Instead of worrying about how much of your award money could possibly go toward taxes each year, you can focus on furthering your studies and eventually getting a degree.

Health care benefits

Flamingo Images/Adobe black female doctor in front of medical team

Health care benefits are also something you don't have to pay taxes on. This is great news for those who receive health insurance through their employer or purchase it themselves. This benefit applies to both individual and group health insurance plans, as well as government-funded programs like Medicare and Medicaid.

Additionally, this includes long-term care coverage, vision and dental plans, mental health services, and other ancillary benefits like transportation assistance for medical appointments. Plus, if you take part in a flexible spending account (FSA) or health savings account (HSA), you can use that money tax-free as long as it goes toward approved medical expenses.

Retail cash rebates

PaeGAG/Adobe man using cashback app on phone

Retail cash rebates are discounts offered when customers purchase goods and services from them. This means that when customers buy something, they get a percentage back in the form of a rebate check, gift card, or other type of reward. Generally these discounts range from 1% to 10% of the original price, but can be even greater depending on how much you buy. 

Here's one of our favorite ways to find good deals online. 

The main benefit of retail cash rebates is that they are generally non-taxable. The IRS treats a rebate as lowering the cost of a purchase, not as income. This means that if you get a rebate check from your favorite store, you don't have to declare it as income when filing your taxes.


Mix and Match Studio/Adobe man having birthday party and receiving gifts

Gift givers can rest easy knowing that their generosity isn't going to cost them or the recipient anything in taxes up to a certain amount. But before they go on a gift-giving spree, it's important to remember that there are some limitations and restrictions imposed by the IRS regarding gifts.

For example, a parent may give a child up to $16,000 in the 2022 tax year without incurring a tax. The IRS says a gift must be given with "detached generosity," meaning that the gift cannot be conditional upon receiving something from the recipient in return. Gifts cannot be used to pay off a debt or as part of a business transaction.

Bottom line

dusanpetkovic1/Adobe young smiling man holding bills in his hands and calculating payment

There are lots of great things you don't have to pay taxes on in 2023. We've gone over some tax-free items like certain scholarships, gifts and inheritances, health care benefits, alimony payments, and more.

Just remember that these items should be verified with your accountant or tax preparer before filing your taxes. If you’re preparing your own taxes using the best tax software, know that the latest programs are updated with current tax law each year. If you're interested in reducing your taxable income in 2023, consider meeting with a financial advisor.

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Author Details

Ryan Clancy Ryan Clancy is a freelance writer and blogger. He's passionate about all things finance and tech, especially personal finance, and bringing it down to a level that everyone can understand. Ryan lives in New York City, and writes about all types of finance and tech at sites such as Forbes, iCap, Nas Academy, PolicyScout, Integrate.io, and many more.

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