Tax-Exempt Bonds
Tax-exempt bonds are debt securities issued by governments or municipalities to raise funds for public projects, like schools or roads. Investors buy these bonds, lending money to the issuer in exchange for interest payments. The key benefit is that the interest earned on these bonds is usually exempt from federal income tax, and sometimes state and local taxes as well. This makes them attractive to investors in higher tax brackets, as they can effectively earn a better return than taxable bonds while supporting community development.
Additional Insights
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Tax-exempt bonds are financial securities issued by government entities, like states or municipalities, to raise money for public projects, such as schools or roads. The key feature is that the interest earned by investors on these bonds is not subject to federal income tax, and sometimes state and local taxes as well. This tax advantage typically allows issuers to offer lower interest rates compared to taxable bonds, making them attractive to investors seeking tax savings. Overall, they help fund public services while providing a potentially beneficial investment option.