In the calculation of gross income, income that is nontaxable in total is generally not reported on the tax return, while income that is partially taxable and partially nontaxable is generally reported on the return.

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This is because the calculation of gross income includes only taxable income. Nontaxable income, such as certain types of municipal bond interest, is excluded from gross income. However, if income is partially taxable and partially nontaxable, the taxable portion must be reported on the tax return.

In the Calculation of Gross Income, Income That Is Nontaxable