In short
Interest on bonds issued by state and local governments is generally excluded from federal gross income.
Key takeaways
- Interest on certain private activity bonds is a preference item for the alternative minimum tax.
- Tax-exempt interest counts toward provisional income when taxing Social Security benefits.
- Interest on money borrowed to buy tax-exempt bonds isn't deductible.
Where it's tested
REG: Individual Taxation: Gross Income — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Which of the following items is included in a taxpayer's federal gross income?