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The appeal of municipal bonds lies in their tax advantages. Their interest income is typically exempt from federal income tax, and potentially state and local taxes if the investor resides in the ...
Tax-equivalent yield = Municipal bond yield / (1 – your total tax rate) For example, imagine you pay federal tax at a 24 percent rate and state tax at a rate of 6 percent, and the municipal bond ...
Also, while the interest income may be tax-free, capital gains from selling municipal bonds are subject to taxation. Additionally, private activity bonds, a type of municipal bond, are typically ...
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]
General obligation bond. A general obligation bond is a common type of municipal bond in the United States that is secured by a state or local government 's pledge to use legally-available resources, including tax revenues, to repay bondholders. [1]
Public financing method. Tax increment financing(TIF) is a public financingmethod that is used as a subsidyfor redevelopment, infrastructure, and other community-improvement projects in many countries, including the United States. The original intent of a TIF program is to stimulate private investment in a blighted area that has been designated ...
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