Tax-Exempt Security

See: Muni Bond.

A security where the interest isn't taxable. Buy a muni bond at a discount to par; like...you've paid $940 for it. It throws off 5% a year for about 5 years until it pays off fully. You'll pay tax on the $60 of gain to the $1,000 par value (about 12 bucks a year), but you won't pay tax on the interest of 50 bucks a year it throws off. Magic.