Municipal Bonds: When "Tax-Free" Isn't So Free

Topics:
Taxes
Tags:
Finance,
Financial Planning,
Free Trade,
Municipal Bond,
Personal Finance,
Taxes
Source:
Charles Schwab

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Overview: Municipal bonds have long been an attractive investment option for tax-sensitive investors, because munis are free of federal income tax and often state tax too. Add in the fact that munis generally have relatively higher credit quality and lower price volatility than comparable taxable bonds, and munis could trump corporate bonds even if you're not in the top tax bracket. But there are at least two instances where you need to look beyond your marginal tax bracket to see if munis are right for you. If you receive Social Security benefits or are subject to the Alternative Minimum Tax (AMT), your tax-free muni income may not be so free after all.

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Format: HTML | Date: Jan 2006 | Pages: 4


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