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Not only do municipal bonds pay interest (generally twice a year), but that interest is always exempt from federal taxes. ... And you may want to focus on stocks that pay dividends for the ongoing ...
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.
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 investor‐owned 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."
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.