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Tax-free municipal bonds are not just a source of investment but also a significant contributor to public projects such as roads, schools and hospitals. These debt instruments are issued by local ...
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.
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]
Tax-Free Municipal Bonds The easiest — and indeed, one of the only — ways to generate tax-free income from your investments is to buy municipal bonds. Generally, municipal bonds are tax-free ...
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]
Positive, tax-free carry can reach into the double digits. The bet in municipal bond arbitrage is that, over a longer period of time, two similar instruments--municipal bonds and interest rate swaps--will correlate with each other; they are both very high quality credits, have the same maturity and are denominated in U.S. dollars.
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