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You’ll owe federal taxes, and probably state taxes, too, on most of your income. But there are some sources that Uncle Sam won’t touch. Keep in mind, too, that there are nine states that don’t tax your income.
Here are eight types of income that are free from federal taxes.
1. Child support
Child support payments are nontaxable income for those who receive it, and shouldn’t be included as income when you file your taxes.
If you’re making child support payments, those payments are not deductible on your taxes.
2. Disaster relief assistance
If you suffered through a disaster and qualify for assistance payments or other types of compensation, that money is usually nontaxable.
Still, there are rules to keep in mind: To qualify, the disaster relief must be based on FEMA’s individual assistance eligibility rules and announced by the IRS as eligible for tax relief.
3. Financial gifts
If you receive assets or cash gifts from friends or family, that gift is tax-free to you.
However, the giver may be required to file a gift tax return for large gifts (over $19,000 per recipient in 2025). But they won’t be required to pay federal gift taxes until they give away millions during their lifetimes.
4. Inheritance
If you receive an inheritance, you won’t owe any estate tax. The deceased person’s estate pays any federal or state estate taxes that might be owed.
However, while there’s no federal inheritance tax, you may need to pay an inheritance tax at the state level. Six states levy an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania. (Iowa ended its inheritance tax, starting in 2025; it’s in effect for 2024.)
Inheritance tax is tied to the place where the person died. If you live in a state with no inheritance tax, but you inherit money from someone who died in a state that levies an inheritance tax, you may well owe that tax.
5. Interest on municipal bonds
Usually, interest income received on bonds is taxable on the federal and state level. However, municipal bonds issued by the federal government and state entities are an exception. These bonds are used to fund public infrastructure, repairs and financing.
If you own municipal bonds that are issued in the state you live in, the interest income usually is nontaxable income. You may be subject to short-term or long-term capital gains taxes upon sale of the bond.
Also, if you’re receiving Social Security benefits or paying Medicare premiums, keep in mind that muni bond income is included when determining how much of your Social Security benefit is taxable and whether you have to pay a surcharge on Medicare premiums.
6. Life insurance death benefits
If you are listed as a beneficiary on a life insurance policy, the death benefit proceeds from the policy are generally considered nontaxable income.
Interest earned on life insurance proceeds could be taxable.
7. Profit on your home sale
If you sell your home for a profit, you may be eligible for a tax exemption of up to $250,000 if you file as single or $500,000 if married filing jointly.
To qualify for this capital gains tax exemption, you must have owned and used your home as your primary residence for at least two of the last five years.
8. Roth IRA income
Withdrawals from 401(k)s, 403(b)s and traditional IRAs are typically taxable. But qualified withdrawals from Roth accounts — Roth IRAs, Roth 401(k)s and Roth 403(b)s — are tax-free.
Keep in mind that your contributions to a Roth IRA can be withdrawn tax-free at any time, because you already paid taxes on that money. However, to withdraw investment earnings tax-free, you need to heed the withdrawal rules, including the Roth IRA 5-year rule.
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