Should nontaxable income be reported on a taxpayer's tax return?

Nontaxable income should indeed be reported on a taxpayer's tax return. This includes instances where certain types of income may not be subject to federal taxation but still must be disclosed for various reasons, such as providing a complete financial picture to the IRS. Reporting nontaxable income helps maintain transparency about the taxpayer's overall financial situation.

Moreover, some forms of nontaxable income may affect eligibility for certain tax credits and deductions or provide necessary context for other tax calculations. Therefore, to ensure compliance with tax regulations and to give an accurate account of all income sources, taxpayers should report nontaxable income, even though it may not affect their tax liability.