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Taxmap/pub17/p17-072.htm#TXMP3f319872 Other Income

Income

The following brief discussions are arranged in alphabetical order. Income items that are discussed in greater detail in another publication include a reference to that publication.

Taxmap/pub17/p17-072.htm#TXMP419f9219 Activity not for profit.

Hobby Expenses

You must include on your return income from an activity from which you do not expect to make a profit. An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. Enter this income on Form 1040, line 21. Deductions for expenses related to the activity are limited. They cannot total more than the income you report and can be taken only if you itemize deductions on Schedule A (Form 1040). See Not-for-Profit Activities in chapter 1 of Publication 535 for information on whether an activity is considered carried on for a profit.

Taxmap/pub17/p17-072.htm#TXMP6846fa34 Alaska Permanent Fund dividend.

Alaska Permanent Fund dividend.

If you received a payment from Alaska's mineral income fund (Alaska Permanent Fund dividend), report it as income on line 21 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. The state of Alaska sends each recipient a document that shows the amount of the payment with the check. The amount is also reported to IRS.

Taxmap/pub17/p17-072.htm#TXMP20db7574 Alimony.

Alimony

Include in your income on Form 1040, line 11, any alimony payments you receive. Amounts you receive for child support are not income to you. Alimony and child support payments are discussed in chapter 20.

Taxmap/pub17/p17-072.htm#TXMP13c60c40 Bribes.

If you receive a bribe, include it in your income.

Taxmap/pub17/p17-072.htm#TXMP389474da Campaign contributions.

Campaign contributions.

These contributions are not income to a candidate unless they are diverted to his or her personal use. To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns. However, interest earned on bank deposits, dividends received on contributed securities, and net gains realized on sales of contributed securities are taxable and must be reported on Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations. Excess campaign funds transferred to an office account must be included in the officeholder's income on Form 1040, line 21, in the year transferred.

Taxmap/pub17/p17-072.htm#TXMP0db99087 Cash rebates.

A cash rebate you receive from a dealer or manufacturer of an item you buy is not income, but you must reduce your basis by the amount of the rebate.

Taxmap/pub17/p17-072.htm#TXMP1f951d1f
Example.

You buy a new car for $9,000 cash and receive a $400 rebate check from the manufacturer. The $400 is not income to you. Your basis in the car is $8,600. This is your basis on which you figure gain or loss if you sell the car, and depreciation if you use it for business.

Taxmap/pub17/p17-072.htm#TXMP0525d6d0 Casualty insurance and other reimbursements.

Casualty insurance and other reimbursements.

You generally should not report these reimbursements on your return. See Publication 547, Casualties, Disasters, and Thefts, for more information.

Taxmap/pub17/p17-072.htm#TXMP32868768 Child support payments.

Child support payments.

You should not report these payments on your return. See Publication 504, Divorced or Separated Individuals, for more information.

Taxmap/pub17/p17-072.htm#TXMP57379c10 Court awards and damages.

Court awards and damages.

To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. Include the following as ordinary income.

1. Interest on any award.
2. Compensation for lost wages or lost profits in most cases.
3. Punitive damages. It does not matter if they relate to a physical injury or physical sickness.
4. Amounts received in settlement of pension rights (if you did not contribute to the plan).
5. Damages for:
   1. Patent or copyright infringement,
   2. Breach of contract, or
   3. Interference with business operations.
6. Back pay and damages for emotional distress received to satisfy a claim under Title VII of the Civil Rights Act of 1964.

Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments).

Taxmap/pub17/p17-072.htm#TXMP630e4e24 Emotional distress.

Emotional distress itself is not a physical injury or physical sickness, but damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. Do not include them in your income.

If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders.

Taxmap/pub17/p17-072.htm#TXMP6e412708 Unlawful discrimination claims.

You may be able to take a deduction for attorney fees and court costs paid after October 22, 2004, for actions settled or decided after that date involving a claim of unlawful discrimination, a claim against the United States Government, or a claim made under section 1862(b)(3)(A) of the Social Security Act, but only up to the amount included in gross income for the tax year from such claim. For more information, see Publication 525.

Taxmap/pub17/p17-072.htm#TXMP692b20ab Credit card insurance.

Credit card insurance.

Generally, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability, or unemployment. Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year.

Taxmap/pub17/p17-072.htm#TXMP1564c43d Employment agency fees.

Employment agency fees.

If you get a job through an employment agency, and the fee is paid by your employer, the fee is not includible in your income if you are not liable for it. However, if you pay it and your employer reimburses you for it, it is includible in your income.

Taxmap/pub17/p17-072.htm#TXMP0dbaca74 Energy conservation subsidies.

Energy conservation subsidies

You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit.

Taxmap/pub17/p17-072.htm#TXMP0fdf0575 Energy conservation measure.

This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand.

Taxmap/pub17/p17-072.htm#TXMP7ed57d2b Dwelling unit.

This includes a house, apartment, condominium, mobile home, boat, or similar property. If a building or structure contains both dwelling and other units, any subsidy must be properly allocated.

Taxmap/pub17/p17-072.htm#TXMP0a5e45bb Estate and trust income.

Estate and Trust Income

An estate or trust, unlike a partnership, may have to pay federal income tax. If you are a beneficiary of an estate or trust, you may be taxed on your share of its income distributed or required to be distributed to you. However, there is never a double tax. Estates and trusts file their returns on Form 1041, U.S. Income Tax Return for Estates and Trusts, and your share of the income is reported to you on Schedule K-1 (Form 1041).

Taxmap/pub17/p17-072.htm#TXMP25bbd231 Current income required to be distributed.

If you are the beneficiary of an estate or trust that must distribute all of its current income, you must report your share of the distributable net income, whether or not you actually received it.

Taxmap/pub17/p17-072.htm#TXMP6683f22a Current income not required to be distributed.

If you are the beneficiary of an estate or trust and the fiduciary has the choice of whether to distribute all or part of the current income, you must report:

• All income that is required to be distributed to you, whether or not it is actually distributed, plus
• All other amounts actually paid or credited to you,

up to the amount of your share of distributable net income.

Taxmap/pub17/p17-072.htm#TXMP66b49d87 How to report.

Treat each item of income the same way that the estate or trust would treat it. For example, if a trust's dividend income is distributed to you, you report the distribution as dividend income on your return. The same rule applies to distributions of tax-exempt interest and capital gains.

The fiduciary of the estate or trust must tell you the type of items making up your share of the estate or trust income and any credits you are allowed on your individual income tax return.

Taxmap/pub17/p17-072.htm#TXMP3e44d9ff Losses.

Losses of estates and trusts generally are not deductible by the beneficiaries.

Taxmap/pub17/p17-072.htm#TXMP447b35db Grantor trust.

Income earned by a grantor trust is taxable to the grantor, not the beneficiary, if the grantor keeps certain control over the trust. (The grantor is the one who transferred property to the trust.) This rule applies if the property (or income from the property) put into the trust will or may revert (be returned) to the grantor or the grantor's spouse.

Generally, a trust is a grantor trust if the grantor has a reversionary interest valued (at the date of transfer) at more than 5% of the value of the transferred property.

Taxmap/pub17/p17-072.htm#TXMP06065356 Expenses paid by another.

Expenses paid by another.

If your personal expenses are paid for by another person, such as a corporation, the payment may be taxable to you depending upon your relationship with that person and the nature of the payment. But if the payment makes up for a loss caused by that person, and only restores you to the position you were in before the loss, the payment is not includible in your income.

Taxmap/pub17/p17-072.htm#TXMP0cb034d9 Fees for services.

Include all fees for your services in your income. Examples of these fees are amounts you receive for services you perform as:

• A corporate director,
• An executor, administrator, or personal representative of an estate,
• A notary public, or
• An election precinct official.

Taxmap/pub17/p17-072.htm#TXMP25638ea1 Nonemployee compensation.

If you are not an employee and the fees for your services from the same payer total $600 or more for the year, you may receive a Form 1099-MISC. You may need to report your fees as self-employment income. See Self-Employed Persons, in chapter 1, for a discussion of when you are considered self-employed.

Taxmap/pub17/p17-072.htm#TXMP39ec712e Corporate director.

Corporate director fees are self-employment income. Report these payments on Schedule C or Schedule C-EZ (Form 1040).

Taxmap/pub17/p17-072.htm#TXMP5dea401e Executor, administrator, or personal representative of an estate.

All personal representatives must include in their gross income fees paid to them from an estate. If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on Form 1040, line 21. If you are in the trade or business of being an executor, report these fees as self-employment income on Schedule C or Schedule C-EZ (Form 1040). The fee is not includible in income if it is waived.

Taxmap/pub17/p17-072.htm#TXMP6ac8caa7 Notary public.

Report payments for these services on Schedule C or Schedule C-EZ (Form 1040). These payments are not subject to self-employment tax. (See the separate instructions for Schedule SE (Form 1040) for details.)

Taxmap/pub17/p17-072.htm#TXMP2b3c6580 Election precinct official.

You should receive a Form W-2 showing payments for services performed as an election official or election worker. Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ.

Taxmap/pub17/p17-072.htm#TXMP632d251d Foster-care providers.

Payments you receive from a state, political subdivision, or a qualified foster care placement agency for providing care to qualified foster individuals in your home generally are not included in your income. However, you must include in your income payments received for the care of more than 5 individuals age 19 or older and certain difficulty-of-care payments.

A qualified foster individual is a person who:

1. Is living in a foster family home, and
2. Was placed there by:
   1. An agency of a state or one of its political subdivisions, or
   2. A qualified foster care placement agency.

Taxmap/pub17/p17-072.htm#TXMP1b951739 Difficulty-of-care payments.

These are additional payments that are designated by the payer as compensation for providing the additional care that is required for physically, mentally, or emotionally handicapped qualified foster individuals. A state must determine that the additional compensation is needed, and the care for which the payments are made must be provided in your home.

You must include in your income difficulty-of-care payments received for more than:

• 10 qualified foster individuals under age 19, or
• 5 qualified foster individuals age 19 or older.

Taxmap/pub17/p17-072.htm#TXMP1fac8773 Maintaining space in home.

If you are paid to maintain space in your home for emergency foster care, you must include the payment in your income.

Taxmap/pub17/p17-072.htm#TXMP6fa96dc7 Reporting taxable payments.

If you receive payments that you must include in your income, you are in business as a foster-care provider and you are self-employed. Report the payments on Schedule C or Schedule C-EZ (Form 1040). See Publication 587, Business Use of Your Home (Including Use by Daycare Providers), to help you determine the amount you can deduct for the use of your home.

Taxmap/pub17/p17-072.htm#TXMP5b9c0034 Found property.

Found property.

If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession.

Taxmap/pub17/p17-072.htm#TXMP379ec51c Free tour.

If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income. Report the fair market value of the tour on Form 1040, line 21, if you are not in the trade or business of organizing tours. You cannot deduct your expenses in serving as the voluntary leader of the group at the group's request. If you organize tours as a trade or business, report the tour's value on Schedule C or Schedule C-EZ (Form 1040).

Taxmap/pub17/p17-072.htm#TXMP5df12852 Gambling winnings.

Winnings

You must include your gambling winnings in income on Form 1040, line 21. If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings. See chapter 30 for information on recordkeeping.

Taxmap/pub17/p17-072.htm#TXMP7c2ca4fe Lotteries and raffles.

Winnings from lotteries and raffles are gambling winnings. In addition to cash winnings, you must include in your income the fair market value of bonds, cars, houses, and other noncash prizes.

If you win a state lottery prize payable in installments, see Publication 525 for more information.

Taxmap/pub17/p17-072.htm#TXMP0aa8d00f Form W-2G.

You may have received a Form W-2G, Certain Gambling Winnings, showing the amount of your gambling winnings and any tax taken out of them. Include the amount from box 1 on Form 1040, line 21. Include the amount shown in box 2 on Form 1040, line 63, as federal income tax withheld.

Taxmap/pub17/p17-072.htm#TXMP02dee211 Gifts and inheritances.

Gifts and Inheritances

Generally, property you receive as a gift, bequest, or inheritance is not included in your income. However, if property you receive this way later produces income such as interest, dividends, or rents, that income is taxable to you. If property is given to a trust and the income from it is paid, credited, or distributed to you, that income is also taxable to you. If the gift, bequest, or inheritance is the income from the property, that income is taxable to you.

Taxmap/pub17/p17-072.htm#TXMP6ccb2292 Inherited pension or IRA.

If you inherited a pension or an individual retirement arrangement (IRA), you may have to include part of the inherited amount in your income. See chapter 11 if you inherited a pension. See chapter 18 if you inherited an IRA.

Taxmap/pub17/p17-072.htm#TXMP1c18de3a Hobby losses.

Hobby losses.

Losses from a hobby are not deductible from other income. A hobby is an activity from which you do not expect to make a profit. See Activity not for profit, earlier.

If you collect stamps, coins, or other items as a hobby for recreation and pleasure, and you sell any of the items, your gain is taxable as a capital gain. (See chapter 17.) However, if you sell items from your collection at a loss, you cannot deduct the loss.

Taxmap/pub17/p17-072.htm#TXMP6d3b4ff1 Holocaust victims restitution.

Restitution payments you receive as a Holocaust victim (or the heir of a Holocaust victim) and interest earned on the payments, including interest earned on amounts held in certain escrow accounts or funds, are not taxable. You also do not include them in any computations in which you would ordinarily add excludable income to your adjusted gross income, such as the computation to determine the taxable part of social security benefits. If the payments are made in property, your basis in the property is its fair market value when you receive it.

Excludable restitution payments are payments or distributions made by any country or any other entity because of persecution of an individual on the basis of race, religion, physical or mental disability, or sexual orientation by Nazi Germany, any other Axis regime, or any other Nazi-controlled or Nazi-allied country, whether the payments are made under a law or as a result of a legal action. They include compensation or reparation for property losses resulting from Nazi persecution, including proceeds under insurance policies issued before and during World War II by European insurance companies.

Taxmap/pub17/p17-072.htm#TXMP06a7489a Illegal income.

Illegal income.

Illegal income, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity.

Taxmap/pub17/p17-072.htm#TXMP014abf07 Indian fishing rights.

Indian fishing rights.

If you are a member of a qualified Indian tribe that has fishing rights secured by treaty, executive order, or an Act of Congress as of March 17, 1988, do not include in your income amounts you receive from activities related to those fishing rights. The income is not subject to income tax, self-employment tax, or employment taxes.

Taxmap/pub17/p17-072.htm#TXMP4b9a9417 Interest on frozen deposits.

Interest income on frozen deposits.

In general, you exclude from your income the amount of interest earned on a frozen deposit. See Interest income on frozen deposits in chapter 8.

Taxmap/pub17/p17-072.htm#TXMP36a67bc5 Interest on qualified savings bonds.

Interest on qualified savings bonds.

You may be able to exclude from income the interest from qualified U.S. savings bonds you redeem if you pay qualified higher educational expenses in the same year. For more information on this exclusion, see Education Savings Bond Program under U.S. Savings Bonds in chapter 8.

Taxmap/pub17/p17-072.htm#TXMP03656cad Job interview expenses.

Job interview expenses.

If a prospective employer asks you to appear for an interview and either pays you an allowance or reimburses you for your transportation and other travel expenses, the amount you receive is generally not taxable. You include in income only the amount you receive that is more than your actual expenses.

Taxmap/pub17/p17-072.htm#TXMP22b11552 Jury duty.

Jury duty pay you receive must be included in your income on Form 1040, line 21. If you must give the pay to your employer because your employer continues to pay your salary while you serve on the jury, you can deduct the amount turned over to your employer as an adjustment to your income. Include the amount you repay your employer on Form 1040, line 35. Enter "Jury Pay" and the amount on the dotted line next to line 35.

Taxmap/pub17/p17-072.htm#TXMP2abfac34 Kickbacks.

You must include kickbacks, side commissions, push money, or similar payments you receive in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040), if from your self-employment activity.

Taxmap/pub17/p17-072.htm#TXMP7c26b803
Example.

You sell cars and help arrange car insurance for buyers. Insurance brokers pay back part of their commissions to you for referring customers to them. You must include the kickbacks in your income.

Taxmap/pub17/p17-072.htm#TXMP315080a3 Medical savings accounts (MSAs).

MSA

You generally do not include in income amounts you withdraw from your Archer MSA or Medicare Advantage MSA if you use the money to pay for qualified medical expenses. Generally, qualified medical expenses are those you can deduct on Schedule A (Form 1040), Itemized Deductions. For more information about qualified medical expenses, see chapter 23. For more information about Archer MSAs or Medicare Advantage MSAs, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.

Taxmap/pub17/p17-072.htm#TXMP41009ced Prizes and awards.

Scholarships, Grants, Prizes, and Awards

If you win a prize in a lucky number drawing, television or radio quiz program, beauty contest, or other event, you must include it in your income. For example, if you win a $50 prize in a photography contest, you must report this income on Form 1040, line 21. If you refuse to accept a prize, do not include its value in your income.

Prizes and awards in goods or services must be included in your income at their fair market value.

Taxmap/pub17/p17-072.htm#TXMP3cce1cac Employee awards or bonuses.

Cash awards or bonuses given to you by your employer for good work or suggestions generally must be included in your income as wages. However, certain noncash employee achievement awards can be excluded from income. See Bonuses and awards in chapter 6.

Taxmap/pub17/p17-072.htm#TXMP6999edd3 Pulitzer, Nobel, and similar prizes.

If you were awarded a prize in recognition of accomplishments in religious, charitable, scientific, artistic, educational, literary, or civic fields, you generally must include the value of the prize in your income. However, you do not include this prize in your income if you meet all of the following requirements.

• You were selected without any action on your part to enter the contest or proceeding.
• You are not required to perform substantial future services as a condition to receiving the prize or award.
• The prize or award is transferred by the payer directly to a governmental unit or tax-exempt charitable organization as designated by you.

See Publication 525 for more information about the conditions that apply to the transfer.

Taxmap/pub17/p17-072.htm#TXMP4cf40f2d Qualified tuition programs (QTPs).

Qualified tuition programs (QTPs).

A qualified tuition program (also known as a 529 program) is a program set up to allow you to either prepay, or contribute to an account established for paying, a student's qualified higher education expenses at an eligible educational institution. A program can be established and maintained by a state, an agency or instrumentality of a state, or an eligible educational institution.

The part of a distribution representing the amount paid or contributed to a QTP is not included in income. This is a return of the investment in the program.

The beneficiary generally does not include in income any earnings distributed from a QTP established and maintained by a state (or an agency or instrumentality of the state) if the total distribution is less than or equal to adjusted qualified higher education expenses. See Publication 970, Tax Benefits for Education, for more information.

Taxmap/pub17/p17-072.htm#TXMP018f654f Railroad retirement annuities.

Railroad retirement annuities.

The following types of payments are treated as pension or annuity income and are taxable under the rules explained in chapter 12.

• Tier 1 railroad retirement benefits that are more than the social security equivalent benefit.
• Tier 2 benefits.
• Vested dual benefits.

Taxmap/pub17/p17-072.htm#TXMP11af9565 Rewards.

If you receive a reward for providing information, include it in your income.

Taxmap/pub17/p17-072.htm#TXMP224ca53b Sale of home.

Sale of Home

You may be able to exclude from income all or part of any gain from the sale or exchange of a personal residence. See chapter 16.

Taxmap/pub17/p17-072.htm#TXMP4242dc7f Sale of personal items.

Sale of personal items.

If you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry, or silverware, your gain is taxable as a capital gain. Report it on Schedule D (Form 1040). You cannot deduct a loss.

However, if you sold an item you held for investment, such as gold or silver bullion, coins, or gems, any gain is taxable as a capital gain and any loss is deductible as a capital loss.

Taxmap/pub17/p17-072.htm#TXMP22a94a75
Example.

You sold a painting on an online auction website for $100. You bought the painting for $20 at a garage sale years ago. Report your gain as a capital gain on Schedule D (Form 1040).

Taxmap/pub17/p17-072.htm#TXMP0ce2361a Scholarships and fellowships.

Fellowship

A candidate for a degree can exclude amounts received as a qualified scholarship or fellowship. A qualified scholarship or fellowship is any amount you receive that is for:

• Tuition and fees to enroll at or attend an educational institution, or
• Fees, books, supplies, and equipment required for courses at the educational institution.

Amounts used for room and board do not qualify for the exclusion. See Publication 970 for more information on qualified scholarships and fellowship grants.

Taxmap/pub17/p17-072.htm#TXMP1f649db2 Payment for services.

Generally, you must include in income the part of any scholarship or fellowship that represents payment for past, present, or future teaching, research, or other services. This applies even if all candidates for a degree must perform the services to receive the degree.

For information about the rules that apply to a tax-free qualified tuition reduction provided to employees and their families by an educational institution, see Publication 970.

Taxmap/pub17/p17-072.htm#TXMP6b843082 VA payments.

Allowances paid by the Department of Veterans Affairs are not included in your income. These allowances are not considered scholarship or fellowship grants.

Taxmap/pub17/p17-072.htm#TXMP762afea9 Prizes.

Scholarship prizes won in a contest are not scholarships or fellowships if you do not have to use the prizes for educational purposes. You must include these amounts in your income on Form 1040, line 21, whether or not you use the amounts for educational purposes.

Taxmap/pub17/p17-072.htm#TXMP16afbe70 Stolen property.

Stolen property.

If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner.

Taxmap/pub17/p17-072.htm#TXMP40ff8766 Transporting school children.

Transporting school children

Do not include in your income a school board mileage allowance for taking children to and from school if you are not in the business of taking children to school. You cannot deduct expenses for providing this transportation.

Taxmap/pub17/p17-072.htm#TXMP27162b9b Union benefits and dues.

Union benefits and dues.

Amounts deducted from your pay for union dues, assessments, contributions, or other payments to a union cannot be excluded from your income.

You may be able to deduct some of these payments as a miscellaneous deduction subject to the 2% limit if they are related to your job and if you itemize deductions on Schedule A (Form 1040). For more information, see Union Dues and Expenses in chapter 30.

Taxmap/pub17/p17-072.htm#TXMP378c749a Strike and lockout benefits.

Benefits paid to you by a union as strike or lockout benefits, including both cash and the fair market value of other property, are usually included in your income as compensation. You can exclude these benefits from your income only when the facts clearly show that the union intended them as gifts to you.

Taxmap/pub17/p17-072.htm#TXMP1e728509 Utility rebates.

If you are a customer of an electric utility company and you participate in the utility's energy conservation program, you may receive on your monthly electric bill either:

• A reduction in the purchase price of electricity furnished to you (rate reduction), or
• A nonrefundable credit against the purchase price of the electricity.

The amount of the rate reduction or nonrefundable credit is not included in your income.

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