Triple tax-exempt municipal bonds explained

Save money on taxes by buying local bonds.

There are three different ways that you can get taxed on your bonds when you buy them. Any given bond may require you to pay federal, state, or local taxes – or even all three. However, that is not the case for all bonds, especially if you are buying municipal bonds. As you can probably guess from the name, triple tax-exempt municipal bonds are those that do not require you to pay taxes to any of these three government bodies. Therefore, if you don’t want to pay taxes on your investment, and you’re looking for a relatively risk-free investment, then you should buy one of these bonds.

Generally, the easiest way to get a triple tax-exempt bond is to buy it within your own city or town. The reason for this is that while all municipal bonds are free from federal taxes, most cities and states will charge tax on bonds that have been purchased from other areas. Therefore, if you buy bonds from within your own state, it is likely that there will be no state taxes on those bonds, and the same is the case locally.

Not only are these bonds free from taxes, but they are also a great way to support your local town. The bond money generally goes toward building local infrastructure – for instance, the money might be used to build a new school or some more roads. Therefore, many local areas will offer municipal bonds with slightly higher yields when the money is needed for a particular project.

Not only that, but since these bonds are so safe, you should definitely include them in your investment portfolio. That way, you’ll have some funds that are safe even if the economy takes a bit of a slide.

However, tax-exempt bonds may or may not be the best choice for your investments. You should always make sure that you check around before buying stock or bonds. The benefits of municipal bonds are that you will have low risk, and the money will support your local area. The disadvantages are that usually these bonds have a low yield, so you should not count on making a lot of money out of these investments.