12 Types of Passive Income That Are Not Taxable 

Interest earned from municipal bonds issued by state or local governments is generally exempt from federal income tax and sometimes state and local taxes.

1. Municipal bond interest:

Distributions from a Roth IRA are tax-free as long as certain conditions are met, such as holding the account for at least five years.

2. Roth IRA distributions:

If you sell your primary residence and meet certain requirements, you can exclude up to $250,000 of capital gains ($500,000 for married couples) from taxable income.

3. Capital gains from selling primary residence:

Rental real estate losses can be used to offset passive income, reducing or deferring taxes.

4. Rental real estate losses:

Contributions to an HSA are tax-deductible and withdrawals for qualified medical expenses are tax-free.

5. Contributions to a Health Savings Account (HSA):

If you sell an investment property and use the proceeds to buy another investment property through a 1031 exchange, you can defer paying taxes on the capital gains.

6. 1031 exchanges:

Royalties earned from leasing mineral rights, such as oil and gas, may be taxed at a lower rate than other types of income.

7. Royalties from mineral rights:

Income earned from certain types of trusts, such as a charitable remainder trust, may be exempt from income tax.

8. Income from certain types of trusts:

Qualified dividends received from certain types of investments, such as stocks, may be taxed at a lower rate than ordinary income.

9. Qualified dividend income:

Death benefits paid out from a life insurance policy are generally not taxable.

10. Income from a life insurance policy:

If you have a home-based business, you may be able to deduct certain expenses, such as a portion of your home's utilities, from your taxable income.

11. Income from a home-based business:

Income earned from certain types of crowdfunding, such as rewards-based crowdfunding, may be considered nontaxable gifts.

12. Income from crowdfunding: