Lesson: Interest Income

In this lesson, Nick Palazzolo, CPA, dives into the nuanced world of interest income and its implications on gross income. He clarifies the distinction between taxable and reportable types of interest, explaining that even interest that isn't taxed must be reported. With clear examples, Nick reviews taxable bond interest from corporate entities and installment sale proceeds, stressing their inclusion in gross income. Furthermore, he covers interest earned from delayed tax refunds, which surprisingly, is also taxable. Shifting focus, he highlights exceptions like municipal bonds and U.S. Series savings bonds, which, under certain conditions, are not taxable. Throughout, Nick reinforces a vital aspect of federal taxation—regardless of its applicability to state tax—and provides insights on the qualifications for tax exemptions associated with savings bonds for education, setting the foundation for further discussion in subsequent lessons.