What are the Different Types of Tax Exempt Income?
Tax exempt income is income that you are not obligated to pay income taxes on. In the United States (US), this status can involve federal income tax, state income tax or both, depending on the instrument that warrants this exemption. In addition to individuals having tax exempt income, organizations, societies and clubs can also hold a non-profit status and be exempt from paying income tax on their income sources. For personal income tax, the most common source of tax-free income is the interest paid on municipal and treasury bonds. Municipal bonds come in the form of general obligation bonds, revenue bonds and certificates of participation bonds. They can be purchased as specific bonds on an individual basis, or can be purchased as a composite of bonds, packaged into mutual funds or index funds. The interest is normally paid semi-annually or in the case of zero coupon bonds, at maturity. These bonds are exempt from state and federal taxes as long as the holder of the bond is reporting
Tax exempt income is income that you are not obligated to pay income taxes on. In the United States (US), this status can involve federal income tax, state income tax or both, depending on the instrument that warrants this exemption. In addition to individuals having tax exempt income, organizations, societies and clubs can also hold a non-profit status and be exempt from paying income tax on their income sources. For personal income tax, the most common source of tax-free income is the interest paid on municipal and treasury bonds. Municipal bonds come in the form of general obligation bonds, revenue bonds and certificates of participation bonds. They can be purchased as specific bonds on an individual basis, or can be purchased as a composite of bonds, packaged into mutual funds or index funds.
