What income is exempt from tax?
Certain categories of income are legally exempt from federal, state, or local income taxation under statutory tax codes designed to support specific social and economic policies. Common examples of tax-exempt income include interest earned on municipal bonds issued by state and local governments, qualified Roth IRA distributions, certain inheritances and life insurance payouts received upon the death of the insured, child support payments, and qualified federal foster care payments. Additionally, the federal government permits the exclusion of up to $250,000 of capital gains on the sale of a primary residence for single filers, or $500,000 for married couples filing jointly, provided strict ownership and residency use tests are successfully met.
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