Is the correct usage of the non-taxable or nontaxable? I'm not sure what the correct use is. I want to say that it is with the hyphen however it ha become a debate that this could be incorrect.
The US Government uses nontaxable on their website.
The Merriam-Webster Dictionary, The Free Dictionary, and other dictionaries, also use nontaxable.
Therefore, I would recommend using nontaxable, without the hyphen.
There might be other dictionaries out there that include the hyphen however. If you find a notable dictionary that does this and get points off on a paper for using a hyphen, be sure to show the professor. I might add that the use of a hyphen in many words, as you pointed out, is widely debated.
For example, many people omit the hyphen unless a hyphen would separate doubling a letter (non-native vs nonnative, pre-exist vs preexist) Chicago Manual of Style.