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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 ...
The exception to this is if your income is in a tax-deferred account or if it is exempt from federal tax, such as with municipal bonds, then you don’t have to report the income. How Interest ...
Their interest income is typically exempt from federal income tax, and potentially state and local taxes if the investor resides in the state where the bond was issued.
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]
An alternative minimum taxable income (AMTI) is calculated by taking the ordinary income and adding disallowed items and credits such as state and local tax deductions, interest on private-activity municipal bonds, the bargain element of incentive stock options, foreign tax credits, and home equity loan interest deductions. This broadens the ...
Some income, such as municipal bond interest, is exempt from income tax. Federal receipts by source as share of total receipts (1950–2014). Individual income taxes (purple), payroll taxes/FICA (azure), corporate income taxes (green), excise taxes (orange), estate and gift taxes (yellow), other receipts (blue). [12]
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