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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 ...
Long-term capital gains tax rates are often lower than ordinary income tax rates. Capital gains are taxed at rates of zero, 15 and 20 percent, depending on the investor’s total taxable income.
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.
Capital gains tax is a tax on the sale of an investment, usually stocks, bonds, precious metals and property. Corporate tax is levied on the earnings or profits of a corporation. Dividend tax is a tax on dividends paid to shareholders of a company. Excess profits tax is a tax on unusually high profits levied on a corporation.
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 ...
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]
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