how can i avoid paying tax on investment income 
there are a number of investments and savings vehicles that yield returns that are tax free at least at the federal level the biggest category of these is municipal bonds these are issued by state and local governments and public institutions like school districts and water departments in order to raise money the money may be used for specific projects that benefit the community or it may go into the general fund in any case the interest they pay their bondholders is free of federal tax it may or may not be free of state and local tax each state and municipality sets its own rules but often the interest is tax exempt if it is issued in that state keep in mind that municipal bonds pay a lower rate of return than corporate bonds in return for that tax break they are a popular choice for high net worth investors who want to shelter some of their income from taxes 