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Municipal bonds and the de minimis tax. For municipal bonds purchased at a discount, the de minimis tax rule determines whether the bond’s appreciation at maturity will be taxed at ordinary ...
For example, assume an investor in the 38% tax bracket is offered a municipal bond that has a tax-exempt yield of 1.0%. Using the formula above, the municipal bond's taxable equivalent yield is 1.6% (0.01/(1-0.38) = 0.016) - a figure which can be fairly compared to yields on taxable investments such as corporate or U.S. Treasury bonds for ...
Tax-Free Interest: Most municipal bonds are exempt from federal income tax and some may also be state- and local-tax-free. Low Risk: Because they are backed by government entities, muni bonds have ...
If you own municipal bonds that are issued in the state you live in, the interest income usually is nontaxable income. ... you may be eligible for a tax exemption of up to $250,000 if you file as ...
Bonds issued by the government of Puerto Rico and its subdivisions are exempt from federal, state, and local taxes (so called "triple tax exemption"). However, unlike other triple tax exempt bonds, Puerto Rican bonds uphold such exemption regardless of where the bond holder resides. [a] This has made Puerto Rican bonds extremely attractive to ...
Taxation: Interest income from municipal bonds is often tax-exempt at the federal level and may also be exempt from state and local taxes if the investor resides in the issuing state. Interest ...
Muni arb is a relative value strategy that seizes upon an inefficiency that is related to government tax policy; interest on municipal bonds is exempt from federal income tax. [ 1 ] [ 2 ] Because the source of this arbitrage is artificially imposed by government regulation, it has persisted (i.e., it has not been "arbed away") for decades.
The big advantage that muni bonds have is that their interest is exempt from federal income tax. Unlike regular bonds, upon which interest gets taxed at rates as high as 35%, muni bonds let ...
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