Not Always Tax-Free: 7 Municipal Bond Tax Traps February 27, 2024 Cooper Howard Although municipal bonds pay interest that is generally exempt from federal and state income taxes, it's not always free from all taxes. Investors often think of municipal bonds, which are sold by local and...
But first, a quick introduction to taxable municipal bonds: A primer on taxable munis The main difference between a taxable municipal bond and a tax-exempt muni is that taxable munis pay interest income that's subject to federal and state income taxes, whereas tax-exempt munis pay interest ...
Municipal or “muni” bonds Issued by states, cities, counties or local government entities. Income from certain municipal bonds is exempt from federal taxes; some munis are also free from state and local taxes. Corporate bonds Issued by corporations to raise money for different purposes. Corporate...
It's not like I'm not getting compensated for taking on this risk. Let's run the numbers. Remember muni bonds are federal income tax-free, and Treasury bonds are state income tax-free. Mymarginal tax ratesare 37% federal and 5% state. Yields of the Vanguard intermediate tax-exempt and ...
Because California residents don’t pay federal or state income tax on California muni interest, the true return on the funds was higher than the stated figure, depending on an investor’s tax bracket. Bond investors should look at their tax brackets and calculate whether they could earn a bet...
While you'll still owe federal taxes on T-bill income, the assets are exempt from state and local taxes. "This really matters in high-income tax states like California, New York and others," Scanlon said. But there's no benefit in places like Florida or Texas with no state income tax...