Gross income minus any deductions is defined as taxable income according to the IRS. Gross income is determined to be “all income from whatever source derived” according to federal law.

That covers a large portion of income, including not just earned income such as your salary, but investment income and other unearned income. If you trade items or exchange instead of cash, you can be taxed on the value of the items you’ve received. The same is true for winnings, such as gambling and lottery jackpots.

Even money from illegal activities is taxed, according to the IRS. The specific language in the tax code says: “income from illegal activities…must be included in your income.” You can report this on line 21 of the Form 1040, or Schedule C or Schedule C-EZ if you’re self-employed.

Even though the IRS taxes basically everything, there is some income which is excluded from taxation.

1. Employer-Sponsored Educational Assistance: Up to $5,250 of qualified employer provided educational assistance can be excluded from taxation. 
2. Employer Adoption Assistance: It’s not considered income if your boss helps you to cover your adoption expenses, up to $13,570 per child. 
3. Payments Made to Care for Children: Much like child support payments, which aren’t considered taxable income, payments made from the government to foster parents for the care of the children placed in their residence are often non-taxed. 
4. Workers’ Compensation: If you’ve suffered a workplace related illness or injury as stated in either federal or state compensation law, any benefits received are generally tax-exempt. 
5. Life Insurance Proceeds: As a beneficiary, if the insured person dies and money is paid to you, it is tax-free. 
6. Municipal Bond Earnings: Interest earned on state and local municipal bonds are not taxed in most cases. IF you’ve purchased the bonds in your home state, you likely won’t be taxed on the earnings at the state level either. 
7. Gifts: If you receive money or asset as a gift, you are not responsible for paying taxes on it. If federal gift tax applies, the person who gave you the present is the one who must pay. 
8. Inheritances: Federal Inheritance Tax is non-existent, so any money you’ve been left isn’t immediately taxed. However, if you’ve acquired an asset that produces income, such as stock that pays dividends, you will owe tax on the money earned.