Abstract
Municipal bonds, which are also known as muni bonds or simply munis, are commonly issued by state and local governments. Interest paid on munis is generally tax exempt which benefits investors in high tax brackets. Individuals should only own munis in a taxable account so they can capture the tax-exempt benefit. They have very low default/credit risk due to either a high credit rating and/or a third-par* ty guarantee. Capital gains associated with these bonds are taxable unless the de minimis rule applies. Tax-exempt interest payments may also trigger the alternative minimum tax (AMT). Investors can purchase munis directly, or indirectly through a fund.