Question about Tax Free Bonds
- Thread starter Ronster
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If so then wouldnt that defeat the purpose of doing it to prevent getting taxed on it? What would the tax-free over the period of the term benefit be?
Some series of savings bonds are tax free like I and EE over the lifetime of the bond. You buy the bond, it earns interest for 30 years, you do not have to worry about the tax on the interest until you sell the bond, then you pay the tax on the interest earned. You do have the option of paying the tax annually if you wanted to do so.
Some municiple bonds are federal tax free, but might be taxed by a state. It varies from bond to bond, from state to state. Some bonds might be "taxfree" but trigger the federal alternative minimum tax (AMT) and even though they would not be taxable normally, they become taxible.
This is a very complex question you will have to probably seek professional help if you are going to be investing heavily in bonds. If you are going the tax free route you will want a bond that is federal and state tax free, plus does not trigger the AMT.
Some municiple bonds are federal tax free, but might be taxed by a state. It varies from bond to bond, from state to state. Some bonds might be "taxfree" but trigger the federal alternative minimum tax (AMT) and even though they would not be taxable normally, they become taxible.
This is a very complex question you will have to probably seek professional help if you are going to be investing heavily in bonds. If you are going the tax free route you will want a bond that is federal and state tax free, plus does not trigger the AMT.
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