Top 5 Non-Taxable Income Sources In California

Non-Taxable Income Examples
(Question 21, CA State Income Tax Form)

The state government in California has earned notoriety for over-regulating things, and in truth, that reputation is deserved, particularly in matters related to public safety and the environment. As you would expect, a state that is so....diligent...in its lawmaking also has some interesting details in its tax code.

While preparing my California state taxes this weekend, I ran across several unique "adjustments" I could legally make to my taxable income, which could have reduced the overall amount of state income tax I was required to pay. Sadly, as I earned income from none of these sources, they didn't apply to me.

Here are the Top 5 Non-Taxable Income Sources In California.

1. Reward from a Crime Hotline
 - Rest assured, if you tattle in California, you won't be taxed for it.

2. False Imprisonment Compensation
 - That's right. If we get overzealous and inadvertently jail you, we'll pay you for your time in tax-free dollars.

3. Ottoman Turkish Empire Settlement Payment
 - I had no idea the Ottoman Turks were still relevant, but apparently they did some awful stuff to Armenians between 1915-1923. Good to know compensation for near genocide is non-taxable.

4. San Bruno Gas Explosion
- Any reimbursement you received because Pacific Gas & Electric accidentally blew up your home and all your belongings is non-taxable. This gives me an idea for a new state motto: California - our generosity knows no bounds.

5. California Lottery Winnings
- If you're one of the lucky winners (and there must be a handful of you somewhere), you don't have to pay tax on your California Lottery winnings.
Note: You DO have to pay tax on winnings from any other state's lottery.

With so many specific items called out as non-taxable income (including many things I could never have imagined were taxable in the first place), I was surprised to see some income sources not addressed.

For example, do children have to pay taxes on income earned from street corner lemonade stands? If I won American Idol but I'm actually from Oklahoma, is my prize money taxable? Can I keep all those foreign coins I found while beachcombing with my metal detector? And how about the $20 bill I found in the pocket of that coat I haven't worn since last winter? All mine?