As an example, we trade accounting and tax services with an office supply company. We must include in income the fair market value of the office supplies received. But, we also get to deduct these costs as office supplies expense since they are used in our business.
But, when we trade accounting and tax services for a family photo we still have taxable income but we cannot deduct personal expenses. This results in an increase in taxable income in the amount of fair market value of the family photo.
Like all tax law there is an exception to the general rule. An informal exchange of similar services on a non-business basis is generally non-taxable. An example of this is carpooling.
Like any good CPA, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.