Tax Exempt Income

Some income is not taxed by the IRS. It's important that you know the difference.

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Tax-exempt income

Sources of tax-exempt income are:

  • Welfare benefits
  • Interest from municipal bonds
  • Most gifts
  • Most inheritance and bequests
  • Workers compensation
  • Veteran's benefits
  • Federal tax refunds
  • Some scholarships/fellowships

Consult IRS publications for more information, or use an online program for help.

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Tax-exempt scholarships and fellowships

Scholarships are considered taxable if you receive a W2 form with the scholarship listed as wages.

If you an enrolled student ands you do not receive a W2 form for your scholarship or fellowship, the amount is fully excludable from your taxable income.

IRS publications on tax-exempt income

Get more information about tax-exempt income from Publication 525.

Note: you will need an Adobe Acrobat Reader to view these publications, which you can get here. (But you probably already have it.)