Municipal Bonds
You can think of municipal bonds as loans from investors to local governments. Individuals in high-income tax brackets are especially attracted to them and it’s no small wonder- you could make a pretty penny off of them.
Have you got your hands on some that you’re planning on selling? Then your capital gains will be subject to federal tax. That might be a little confusing since municipal bond interests are exempt from the federal tax law.
Also, you might want to check your state’s law to see if interests from bonds are subject to state income taxes or not as they typically are, but not across the board.
