Municipal Bonds

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Discuss the reasons why banks hold Treasury bills and municipal bonds in their investment accounts. Why do they hold few corporate securities?

Best Answer

This isn't a Special Education question. Special Education refers to the provision of services to kids with disabilities. You might do better under a different category.

I understand that if an individual invests in municipal bonds, they do not have to pay federal income tax on the interest, and usually do not have to pay state income tax on the interest either. But what if a corporation buys municipal bonds, do they have to pay federal income tax on the interest? And do they have to pay state income tax on the interest? Thank you advance for your generous help.

Best Answer

It depends on the bond. Check with the broker to get details on how much is tax-exempt. Regardless of the filing entity, tax treatment will be the same. Another words, if an individual is exepmt, Corps, P-ships, and trusts are also exempt.

The U.S treasury bonds has a lower yield period than the Municipal bonds why is this so? For more details go to Yahoo finance for the U.S treasury yield curve.

Best Answer

Muni bonds have a lower yield because the interest earned does not get taxed. It may not be taxable at the state level if the bond is issued from the state you live in. New York and California are two states with high state tax rates where their bonds make a big difference. So in order to compare the 2 bonds, you need to take the taxes out of the Treasury bond and compare the percentages. 5% Treasury = 5% x (100% - 28%) = 3.64%. ( Assume the Fed rate is 28%. If the state tax rate can be included, add it to the 28%) If the muni bond has a higher % than 3.64%, then buy the muni bond.

Is there a site where I can find the going interest rates for Municipal Bonds? Also, does the state of Nebraska tax municipal bonds? I know they are exempt from Federal taxes but I cant find if there is a state tax liability.

Best Answer

For the going rate on Municipal Bonds from Nebraska, try this site: http://www.municipalbonds.com/archive/NE/

Where can you buy municipal bonds? Banks, online... Don't know where to start, thanks!

Best Answer

Be sure you want to do this before you get too deep into it. The real downside, in my case, is to discover that they are practically un-marketable. You seem to be doomed to hold the "City of North Whizbang Sewage Improvement Bond" until maturity, because there is no liquid market for it. I've personally got several through inheritance and found myself stuck as described. Good tax advantages, good return if that is what you want (income vs. growth), but the liquidity is bad. Be sure before you leap.