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Aside from the tax benefits, municipal bonds offer investors the added bonus of being very safe and low risk. This makes them a reliable source of tax-free income during retirement. 4.
In Memphis Bank & Trust Co. v. Garner (1983), the Supreme Court held that states could not levy franchise taxes on federal bond interest if they exempted their own state bonds from taxation. Upon learning of the decision, Davis filed amended Michigan tax returns to 1979, claiming tax refunds on his federal retirement benefits.
If you buy a bond issued in your own state, you’re typically granted a tax exemption from state taxes, as well. This makes municipal bonds particularly valuable in high-tax states like California.
Remember, too, that living in a state that doesn't tax any retirement income won't mean no taxes. There's still the federal government, which does tax some Social Security benefits .
A municipal bond, commonly known as a muni, is a bond issued by state or local governments, or entities they create such as authorities and special districts. In the United States, interest income received by holders of municipal bonds is often, but not always, exempt from federal and state income taxation.
As a result, many governmental employers have now set up 457 and 401(k) plans for their employees, and nonprofit employers have set up 403(b) and 457 plans, each allowing their employees to invest in both. Some state universities and school districts have access to all three tax-deferred plans. However, the total combined annual contribution to ...
Michigan. Michigan’s flat state income tax rate rose for 2024 to 4.25%, ... Municipal bond interest. After-tax pension contributions. Roth IRA and Roth 401(k) withdrawals after age 59 1/2.
In some cases, this arrangement may provide a federal tax exempt status to the bonds, and many times a property tax exemption on the collateral. The sponsoring government is not responsible for bond repayment and the bonds do not affect the government’s credit rating. IRBs are desired as the private business receives a lower interest rate ...