Earning tax-free income is possible through specific investments, legal exemptions, and tax-advantaged accounts. Key methods include utilizing Roth IRAs, investing in municipal bonds, selling a primary home (up to $250k/$500k gain), receiving tax-exempt gifts/inheritances, and leveraging Health Savings Accounts (HSAs).
5 more ways to get tax-free income
You have tax-free allowances for:
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One easy way to pay no income tax is to have little or no taxable income. For tax year 2025, taxpayers receive a standard deduction of $15,750 (singles or married persons filing separately) or $31,500 (marrieds filing jointly). For heads of households, the standard deduction is $23,625 for tax year 2025.
How to pay less taxes in California in 8 ways
Here are some helpful ways to reduce your taxable income and therefore your tax liability.
Inheritances, gifts, cash rebates, alimony payments (for divorce decrees finalized after 2018), child support payments, most healthcare benefits, welfare payments, and money that is reimbursed from qualifying adoptions are deemed nontaxable by the IRS.
Business titans tend to take their compensation as shares in publicly traded companies and privately held businesses, as well as investments in “pass-through” companies with special tax rules.
IRS Free File lets taxpayers prepare and file federal income tax returns online using guided tax preparation software. It's secure, easy and no cost to you. Those who don't qualify can still use Free File Fillable Forms.
Income Tax Exemption list
You generally need to file a U.S. federal tax return if your gross income for Tax Year 2025 (filed in 2026) is above a certain threshold, which varies by filing status and age, for instance, $15,750 for single filers under 65, while self-employed individuals must file if they earn $400 or more in net earnings. Thresholds increase for married couples and those 65 or older, but you might still need to file to claim a refund or refundable credits even if below the income limit.
The "20k rule" refers to the traditional IRS threshold for reporting income from payment apps and online marketplaces on Form 1099-K: over $20,000 in gross payments AND more than 200 transactions in a calendar year. While a law (the American Rescue Plan) temporarily lowered the threshold to $600, recent legislation, the One Big Beautiful Bill Act (OBBBA) (OBBBA), has reinstated the $20,000/200-transaction rule for tax years starting in 2025, providing relief for casual sellers and gig workers.
Everyday tax strategies for Canadians: 5 things to get right
To buy a house, you generally need an income that allows for housing costs (mortgage, taxes, insurance) to be around 28-36% of your gross monthly income, but recent studies show buyers often need $100k+ annual income to afford a median-priced home due to rising prices and rates, with specific requirements varying by location and loan type. A common guideline is the 28/36 rule: spend no more than 28% on housing and 36% on total debt, but lenders look at your Debt-to-Income (DTI) ratio, ideally keeping total debt under 43%.