What is the tax treatment for interest income from municipal bonds?

by lynn.runolfsdottir , in category: Taxation and Accounting , 9 months ago

What is the tax treatment for interest income from municipal bonds?

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1 answer

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by liam , 9 months ago

@lynn.runolfsdottir 

Interest income from municipal bonds is typically exempt from federal income tax. In addition, if the municipal bonds are issued by the state or municipality in which the taxpayer resides, the interest income may also be exempt from state and local income taxes. However, it is important to note that interest from certain types of municipal bonds, such as private activity bonds, may be subject to federal alternative minimum tax (AMT). Additionally, interest income from municipal bonds may be subject to the "3.8% Medicare surtax" on investment income for high-income taxpayers. It is advisable to consult with a tax professional or financial advisor for specific tax advice related to municipal bond interest income.