Triple-tax-free, or “triple tax-exempt”, is a way of describing an investment, usually a municipal bond, where the interest payments are exempt from taxes at the municipal, state and federal levels.

How do I buy municipal tax-free bonds?

Municipal bond funds offer professional management of a bond portfolio. A manager or group of managers select and buy bonds for the mutual fund. You would simply buy shares in the municipal bond mutual fund. You can do so through either a traditional or online brokerage firm or directly from a mutual fund company.

Are tax-free municipal bonds really tax-free?

A municipal bond, also known as a muni, is debt security used to fund capital expenditures for a county, municipality, or state. Municipal bonds are commonly tax-free at the federal level but can be taxable at state or local income tax levels or under certain circumstances.

Are tax-free municipal bond funds safe?

When buying municipal bonds, investors loan money to a community to fund infrastructure and build public works. Muni bonds are popular investments since they are relatively safe and can help investors save on taxes.

Are there any municipal bonds that are tax free?

When bonds are resold, the selling market often prices in changes in interest rates and other factors, causing a divergence between the yield and the coupon rate. Tax-free returns. Sometimes the IRS can be friendly to investors, particularly in the case of municipal bonds, which are exempt from federal income tax.

What does it mean to invest in triple tax free bonds?

Triple-tax-free, or “triple tax-exempt”, is a way of describing an investment, usually a municipal bond, where the interest payments are exempt from taxes at the municipal, state and federal levels. Triple-tax-free municipal bonds incentivize residents to invest in infrastructure improvements that benefit the community.

What does tax equivalent yield in municipal bond mean?

Tax-equivalent yield (TEY) is the yield that a taxable bond must hold to equal or exceed the tax-adjusted yield of a municipal bond. Tax equivalent yield = tax-free yield/1 – tax rate.

When to think twice about buying municipal bonds?

Think Twice Before Buying Tax-Free Municipal Bonds 1 Tax Bracket. The biggest plus to municipal-bond investing also turns out to be the one that requires the most scrutiny. 2 Interest Rate Risk. With respect to principal, investment-grade municipal bonds tend to be stable. 3 Purchasing-Power Risk. 4 Default Risk. …