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Bonds can provide passive income, some of which may be tax-free if you're investing in municipal bonds. The tax-equivalent yield formula can be a useful tool for comparing taxable and tax-free ...
In other words, the muni pays the taxable equivalent of a bond offering 4.28 percent – the threshold where you would be indifferent to the muni over the regular bond. Of course, if your income ...
If you file a federal tax return as an individual, you could pay income tax on up to 50% of your Social Security benefits (assuming a combined income of $25,000 to $34,000).
Each year, high-income taxpayers must calculate and then pay the greater of an alternative minimum tax (AMT) or regular tax. [9] The alternative minimum taxable income (AMTI) is calculated by taking the taxpayer's regular income and adding on disallowed credits and deductions such as the bargain element from incentive stock options, state and local tax deduction, foreign tax credits, and ...
Interest income from most municipal bonds is excludable from gross income for federal income tax purposes, and may be exempt from state income tax as well, depending on the applicable state laws. [14] Internal Revenue Code section 103(a) is the statutory provision that excludes interest on municipal bonds from federal income tax. [15]
The daily portion of the discount uses a compounded interest formula with the principal recalculated every six months. The following table illustrates how to calculate the original issue discount for a $7,462 bond with a $10,000 repayment and a three-year maturity date: [2]
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