Tax free income is money that isn’t subject to income tax like other forms of earnings. There are a variety of different things that can be counted as tax-free income, including:
- Auto rebates
- Child support payments
- Disability payments
- Combat pay
- Lawsuit damages for personal injury cases
- Life insurance dividends up to the premium amount
- Casualty insurance payments
- Education Savings Account withdrawals used for qualifying expenses
- Health Savings Account withdrawals used for qualifying expenses
- Inheritances
- Interest on municipal bonds
- Scholarships and fellowship grants
- Social Security benefits (anywhere from 15% to 100%)
- State tax refunds, if standard deduction taken prior year
- Veteran’s benefits
- Worker’s compensation
- Up to $250,000 in home sale profits for single filers ($500,000 married)
- Roth IRA and Roth 401(k) withdrawals
This is not a complete list, as there are other examples that you may find you are not taxed on.
