Form 1040

Types of income you report on Form 1040

Form 1040 is designed to capture virtually all of your taxable income in one place. The types of income you report and the forms or schedules you’ll need depend on how you earned money during the year.

Employment income

Wages, salaries and tips from an employer are the most common types of income reported on Form 1040. Your employer reports these amounts on a W-2, and you enter the total on Line 1 of Form 1040. This category also includes bonuses, commissions and taxable fringe benefits.

If you worked for more than one employer, you’ll receive a separate W-2 from each. Combine the totals from all W-2s when completing Line 1.

Self-employment income

If you earned income as a freelancer, independent contractor or sole proprietor, you report it using Schedule C which calculates your net profit or loss by subtracting business expenses from your gross income.

Your net income then flows to:

• Schedule 1 (Part I), and
• ultimately to Form 1040, Line 8

You’ll typically receive a 1099-NEC from each client who paid you $600 or more during the year. Self-employment income is also subject to self-employment tax (covering Social Security and Medicare), which is calculated on Schedule SE.

Investment income

Interest, dividends and capital gains from investments are all reported on Form 1040:

• Taxable interest (e.g., from savings accounts, CDs or bonds) goes on Line 2b (reported on Form 1099-INT).
• Qualified dividends go on Line 3a, while ordinary dividends go on Line 3b (reported on Form 1099-DIV).
• Capital gains and losses are reported on Schedule D, with the final amount flowing to Form 1040, Line 7.

Short-term gains (assets held one year or less) are taxed as ordinary income, while long-term gains benefit from lower tax rates.

Retirement income

Distributions from retirement accounts such as 401(k)s, traditional IRAs and pensions are reported on:

• Line 4a / 4b (IRA distributions)
• Line 5a / 5b (pensions and annuities)
• Each is split into:
• Gross amount (4a, 5a)
• Taxable amount (4b, 5b)

Not all retirement income is fully taxable. For example, qualified Roth IRA distributions are generally tax-free, while pensions may be partially taxable depending on contributions. These amounts are reported on Form 1099-R.

Social Security income

Social Security benefits are reported on:

• Line 6a (total benefits)
• Line 6b (taxable portion)

Depending on your total income, up to 85% of your benefits may be taxable. The IRS provides a worksheet in the Form 1040 instructions to calculate the taxable portion.

You’ll receive Form SSA-1099 each year showing the total benefits paid.

Other taxable income

Additional types of income are typically reported through Schedule 1 (Part I) and then carried to Form 1040, Line 8. Common examples include:

• Rental income: Reported on Schedule E after deducting expenses like mortgage interest, repairs, and depreciation.
• Unemployment compensation: Reported on Schedule 1 (based on Form 1099-G).
• Gambling winnings: Reported as other income (Form W-2G or personal records).
• Foreign earned income: Reported even if you qualify for exclusion using Form 2555.
• Alimony received: Taxable if the agreement was finalized before 2019.

If you’re unsure whether a specific type of payment counts as taxable income, the IRS generally considers all income taxable unless a specific exclusion applies.

Common questions about reporting income on Form 1040

Is side hustle income taxable even if it is small?

Yes. All side income, including gig work and online selling, is taxable regardless of amount.

What happens if I forget to report income on Form 1040?

The IRS may charge penalties and interest. You may also need to file an amended return to correct the mistake.

Are gifts and inheritance taxable income?

Generally, gifts and inheritance are not considered taxable income for the recipient, though estate or gift tax rules may apply to the giver.

Start filing your Form 1040 today

Use our fillable Form 1040 to report your income accurately and stay on top of your federal tax return. It lets you enter your information directly into each section so you can complete your filing in a clear and organized way.