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For municipal bonds purchased at a discount, the de minimis tax rule determines whether the bond’s appreciation at maturity will be taxed at ordinary income or capital gains rates. The de ...
For example, let’s say you pay a 32 percent federal rate and an 8 percent state rate. The same 3 percent muni bond now has a tax-equivalent yield of 5 percent. In general, a taxable bond would ...
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An auction rate security (ARS) typically refers to a debt instrument (corporate or municipal bonds) with a long-term nominal maturity for which the interest rate is regularly reset through a Dutch auction. Since February 2008, most such auctions have failed, and the auction market has been largely frozen.
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 .
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.
First, muni bonds are often investment-grade assets. Around seven out of 10 in the Bloomberg Municipal Bond Index are in the top two rungs of credit quality, Schwab cited.
Due to inflation and cuts in ordinary tax rates, a larger number of taxpayers began to pay the AMT. The number of households owing AMT rose from 200,000 in 1982 to 5.2 million in 2017, but was reduced back to 200,000 in 2018 by the TCJA. [6] After the expiry of the TCJA in 2025, the number of AMT taxpayers is expected to rise to 7 million in 2026.