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Short-term gains from bonds held for less than a year are taxed at your ordinary income tax rate, while long-term gains from bonds held for more than a year are taxed at a lower rate, typically ...
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 ...
From 1998 through 2017, tax law keyed the tax rate for long-term capital gains to the taxpayer's tax bracket for ordinary income, and set forth a lower rate for the capital gains. (Short-term capital gains have been taxed at the same rate as ordinary income for this entire period.) [ 16 ] This approach was dropped by the Tax Cuts and Jobs Act ...
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 ...
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 rest of the century balanced new taxes with abolitions: Delaware levied a tax on several classes of income in 1869, then abolished it in 1871; Tennessee instituted a tax on dividends and bond interest in 1883, but Kinsman reports [59] that by 1903 it had produced zero actual revenue; Alabama abolished its income tax in 1884; South Carolina ...
The interest on municipal bonds is generally excludable from gross income for federal income tax purposes (however, capital gains or accruing market discount are not tax exempt); for these purposes, accruing original issue discount is also treated as "interest" which is excludable from gross income for federal income tax purposes. Some ...
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 offers a yield of 3 percent.