Brad Liebe, the owner of KK and B Financial Services for Seniors, assists his clients with all matters related to wealth management. As a financial consultant, Brad Liebe also provides seminars on several topics, including creating tax-free income streams.
One tax-free income stream is the municipal bond. Municipal bonds are often called the triple-tax-free bond because they are exempt from federal, state, and city taxes. The state, county, or city issue these bonds, and the revenue is used to fund public goods or services (i.e. roads and schools).
Consumers benefit from utilizing municipal bonds in a few ways. The issuing tax authority backs the bonds in good faith and credit. The revenue generated from the bonds is not taxed, hence the label tax-free income. Moreover, while the yield of the bond is a little bit lower than other investment types, they are a relatively safe way to invest money in a diversified portfolio.
However, as with all investments, there are a few catches. For one, some bonds might not be exempt from some taxes. Then, there is the alternative minimum tax, a tax that prevents certain types of tax deductions and shelters. Those considering investing in municipal bonds should research the return amount and applicable taxes to determine if municipal bond investing is worthwhile.
