Municipal bonds are commonly referred to as minus . They are issued by the state, counties as well as state governments to raise money for their projects like hospitals, schools etc. The main point noteworthy in this regard is that they are exempt from federal taxes in the first place. In certain cases the investor also gets a waiver on the state tax if he happens to reside in the same area where the bond is issued.
When it comes to the case of tax free municipal bond rates one needs to understand the nature of the bonds in the first place. The first are the general obligation bonds which are backed by the capacity of the issuer to pay the tax. Such type of bonds are undertaken when the project is of common welfare like construction of a sewage tank . But most of the investors leave in a world of misconception as they consider these form of bonds to be safe which is not always the case. These sort of bonds are an ideal example of tax free municipal bond rates.
What compounds the problem is that there is very little information available about the tax free municipal bond rates at the disposal of an individual. They have to rely heavily on the information provided by the credit agencies in this regard. In order to gauge the safety factor the bond holders should ascertain the fact that who is responsible for the interest payments in the case of the bonds, the economic status of the issuer. Other than this the individuals face a tricky situation when they are an average investor as they may find it difficult to distinguish between full taxable bonds as well as tax municipals
Tax free municipal bond rates have the greatest advantage that they are away from the scope of tax. One needs to also understand the fact that the interest rate on such bonds will be lower when one compares to the treasuries but the tax advantages tend to level out things. In addition to this another major advantage with tax free municipal bonds is that they are safe. When one compares between the period 1970 to 2000 the default ratio was as less as 0.04 which is itself is something remarkable. This illustrates the fact in the last 30 years less than one percent of the masses defaulted in the payment.
Tax free municipal bond rates offer an attractive option for the retirees as they can get a stable rate of interest since they are payable twice a year. The point noteworthy is that even if one sells the bond before the maturity rate they are guaranteed to receive the price which are in the market.
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