Most of the cash you rake in will eventually get clipped by federal taxes — and likely by state taxes too. Yet, certain income pockets remain blissfully untouched by Uncle Sam’s tax net. Remember, these types of earnings are entirely off the tax radar, meaning you don’t have to tally them up when filing your return.
1. Child Support Payments
Paying child support? Those payments won’t reduce your taxable income — they’re not deductible — but on the flip side, recipients don’t have to report them as taxable income.
2. Disaster Relief Funds
Survived a natural calamity and got some financial help? If you receive disaster relief aid or compensation qualifying under FEMA’s guidelines, that dough generally isn’t taxable.
However, the catch is that the disaster must be officially declared eligible for federal tax relief, so keep an eye on FEMA’s list.
3. Monetary and Asset Gifts
Cash or property handed over to you by loved ones? Those gifts are yours to keep, tax-free.
But just so you know, if the giver hands out more than $19,000 per person in 2025, they might have to file a gift tax return — although typically they won’t fork over any federal gift tax immediately.
4. Inheritance and Its Taxing Nuances
Inheritance tax isn’t a universal rule; only six states—Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania, and Iowa (until 2024)—impose it.
Interestingly, where the deceased lived dictates if inheritance tax applies. So, even if you reside in a state with zero inheritance tax, inheriting assets from someone who passed in a taxing state could saddle you with a tax bill.
5. Interest from Municipal Bonds
Interest income is typically taxable on both federal and state fronts. Yet, municipal bonds — especially those issued by your living state’s government or local agencies — are a delightful exception.
These public-sector IOUs fund everything from roads to schools. The interest you pocket from them is usually exempt from income tax, though if you sell the bonds, capital gains tax might kick in depending on your holding period.
Note: If you draw Social Security benefits or handle Medicare premiums, muni bond income could influence how much of your benefits are taxable or if you owe an additional Medicare surcharge.
6. Life Insurance Death Benefits
If you’re the beneficiary named on a life insurance policy, the payout after the insured’s passing generally slides under the tax radar.
Be aware, though, that any interest accrued on those benefits after the death might be taxable.
7. Profit From Selling Your Home
Make a tidy profit selling your primary residence? You may dodge capital gains tax on up to $250,000 of those earnings if you’re single, or up to $500,000 if filing jointly.
Qualifying hinges on having lived in and owned your home for at least two out of the last five years before the sale.
8. Roth IRA Withdrawals
While taking money out of 401(k)s, 403(b)s, or traditional IRAs usually triggers tax, cashing out qualified withdrawals from Roth accounts—Roth IRAs, Roth 401(k)s, and Roth 403(b)s—is totally tax-free.
Remember, since contributions to Roth IRAs come from already-taxed income, you can pull out your original contributions anytime without a tax hit. But to snag earnings tax-free, you gotta play by Roth’s withdrawal rules, including the five-year aging requirement.
| Child Support Payments | Not taxable to recipient | Not deductible by payer |
| Disaster Relief Payments | Usually tax-exempt | Must be FEMA-eligible disaster |
| Gifts | Tax-free to recipient | Gift tax return may be required for givers >$19,000 (2025) |
| Inheritance | Varies by state | 6 states enforce inheritance tax |
| Municipal Bond Interest | Usually tax-exempt | May affect Social Security and Medicare calculations |
| Life Insurance Death Benefits | Generally tax-free | Interest on benefits may be taxable |
| Home Sale Profit | Partially or fully exempt | Up to $250K single / $500K joint exemption |
| Roth IRA Withdrawals | Tax-free if qualified | Contributions withdrawable anytime tax-free |
