tax-exempt interest

Tax-exempt interest is income earned from certain investments, such as municipal bonds, that is not subject to federal income tax. These bonds are issued by state and local governments to fund public projects like schools or roads. Because the interest income is tax-free at the federal level (and sometimes state or local levels), investors benefit from higher yields compared to taxable bonds. However, it's important to note that tax-exempt interest may still be subject to alternative minimum tax (AMT) depending on individual circumstances. Overall, it’s an advantageous investment option for those seeking tax-efficient income.