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Tax Exempt Interest

Do I need to report tax exempt interest income? Why?

Some types of interest income are exempt from federal income tax. If you are required to file a tax return you must show any tax exempt interest you receive for informational purposes only.

How to report tax exempt interest income?

Tax exempt interest income are reported on line 8b of the form 1040. Generally you will not receive a Form 1099 INT for tax exempt interest.

Examples of tax exempt interest

Bonds issued by the following entities generally pay tax exempt interest:

  • state and political subdivisions (county or city)
  • District of Columbia, and
  • US possessions and political subdivisions
Example of tax exempt bonds

Examples of tax exempt bonds include those bonds issued by:

  • port authorities
  • toll road commissions
  • utility service authorities
  • community redevelopment agencies
  • qualified volunteer fire departments

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