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Tax-Exempt Interest

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Dictionary Says

Definition of 'Tax-Exempt Interest'

Interest income that is exempt from federal income tax. Although it is not directly taxed, this income may still be required to determine other tax calculations such as Social Security benefits.
Investopedia Says

Investopedia explains 'Tax-Exempt Interest'

For example, municipal bonds are exempt from federal and sometimes state taxes.

Related Definitions

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    Municipal Bond

    A debt security issued by a state, municipality or county to finance its capital expenditures. Municipal bonds are exempt from federal taxes and from most state and local taxes, ...
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  • Tax Shelter

    A legal method of minimizing or decreasing an investor's taxable income and, therefore, his or her tax liability. Tax shelters can range from investments or investment accounts that ...
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  • Tax Shield

    A reduction in taxable income for an individual or corporation achieved through claiming allowable deductions such as mortgage interest, medical expenses, charitable donations, ...
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    • Tax Exempt

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    • Double Exempt

      The status accorded to municipal bonds for which interest is not subject to taxation at either the federal or state level. In general, most states do not tax residents on interest income ...
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