What Types of Income Cannot Be Taxed by the IRS?

If you are a wise taxpayer, you know you should not pay the government more or less than what you owe in taxes to avoid IRS problems. What numerous taxpayers don’t realize is that there are particular income types that the government cannot collect taxes on legally.

The IRS cannot tax certain income types because it is not allowed by tax law. You can keep your money if you know what the IRS can’t tax you with, but to avoid tax issues, you must do it correctly.

Municipal Bonds

Investment instruments are one type that is tax-free. These are state-issued bonds more commonly known as municipal bonds that are free from federal taxes. The tax benefit of these bonds increases when your tax rate increases, meaning their value rises with a rise in your overall income.


Making money from a carpool is another form of income that cannot be taxed. You won’t have IRS issues if you exclude your profits from a carpool.

Selling Your Home

Selling your home is another income source that’s excluded from taxes. If you sell your house, you can exclude up to $250,000 in profits, $500,000 if you file a joint return with your spouse. This exclusion can be claimed every two years. If you sell your home after less than 2 years, you can also claim a partial exclusion. There are many restrictions, so it is advised to consult a tax professional to make sure that you are doing this correctly.


Getting a raise does not just mean getting an increased paycheck amount. You can opt to have your employer cover the cost of a better insurance option or a higher healthcare plan. You won’t need to handle potential IRS problems because the IRS won’t be able to tax your raise.

Choose Law Offices of Darrin T. Mish, P.A. for Tax Relief in Florida

Darrin T. Mish is a veteran tax attorney with over a decade of experience. He is nationally recognized with an AV rating by Martindale-Hubbell and has been honored by a listing in Martindale-Hubbell’s Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute.¬†With a passion for providing IRS help to taxpayers with both individual and payroll tax problems, his firm only focuses on representing clients in the United States with IRS Problems. He also spends a great deal of time traveling the nation providing training to attorneys, CPAs, and Enrolled Agents on how to handle their toughest cases with the IRS.

If you would like more information about his practice and how he can help you, please call his office at (813) 295-7648.

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