Taxable refers to items that are subject to taxation, such as income, food, property, and merchandise. A governing agency usually determines the percentage of taxes that need to be paid on a specific item or service.
Tax free, however, refers to certain types of goods and/or financial products (such as municipal bonds) that are not taxed and with earnings that are not taxed. The tax free status of these goods and/or funds may incentivize individuals and business entities to increase spending or investing, resulting in economic stimulus. Governments will often provide a tax break to investors purchasing government bonds to ensure that enough funding will be available for expenditure projects.
