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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.
A bond fund or debt fund is a fund that invests in bonds, or other debt securities. [1] Bond funds can be contrasted with stock funds and money funds.Bond funds typically pay periodic dividends that include interest payments on the fund's underlying securities plus periodic realized capital appreciation.
That perception could thus potentially allow a local government to borrow at a lower interest rate, saving its taxpayers' money over the life of the bonds. Despite that advantage, many states, such as California under Proposition 13, do not allow local governments to issue unlimited-tax general obligation debt without a public vote.
While municipal bonds generally have lower interest payments compared to other bond types, the tax benefits can sometimes outweigh the higher returns on other categories of bonds, like corporate ...
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 ...
Municipal bond taxes. Municipal bonds issued by local or state governments generally offer interest income that is exempt from federal taxes. Moreover, if you live in the state where the bond is ...
Municipal bonds "typically have lower interest rates than investorâowned utility bonds, resulting in lower costs." [2] Municipal utilities also do not pay dividends to investors which can help reduce costs. Additionally, "municipal utilities are exempt from federal taxes."
The investor receives payment for the face value of the bond plus the interest the bond earned before the call date. Investors might also receive a call premium, which is the amount over the ...