Municipal Bonds
These are bonds issued by your state or local government, and the money you lend goes directly to your community. The greatest advantage of investing in “munis” is that typically they’re free from both state and local taxes and from federal taxation. However, capital gains earned from muni bond sales are subject to all levels of taxation.
Municipal bonds have maturities that range from 1 to 40 years and are also referred to as:
- Tax-exempt bonds and/or
- Tax-free bonds