Chapter 8. Municipal Bonds—Keep the Taxman at Bay

Nothing is certain but death and taxes. A related certainty is that your taxes will rise in the coming years to pay for the trillions in federal government deficit spending that has already occurred in 2008 and 2009. Fortunately, there is an alternative to paying taxes on your investment gains: municipal (also called tax-exempt) bonds. They are attractive to tax-conscious investors because if you choose carefully, the interest you receive will be yours to keep without having to pay any taxes on it.

However, there are downsides to investing in municipal bonds. For one thing, the amount of interest you receive from taxable corporate bonds is frequently higher than what you would receive from municipal ...

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