Tax-exempt income refers to income that is not subject to income tax. There are various types of income that may be tax-exempt under the tax code, such as interest income from municipal bonds, certain types of retirement income, and some types of insurance proceeds.

Tax-exempt income is excluded from gross income for tax purposes, meaning that it is not considered taxable income and is not subject to federal or state income taxes. Some taxpayers may also be eligible for tax deductions or credits related to tax-exempt income, such as deductions for contributions to tax-exempt retirement accounts.

It is important to understand the rules and regulations related to tax-exempt income to accurately report and calculate taxable income and determine the appropriate amount of taxes owed to the government.