Municipal Bond Interest

According to the IRS, municipal bonds are “tax-exempt governmental bonds.” That’s because they are basically loans you give to your state or local government for them to use for public projects such as building new hospitals, bridges, roads and the like.

Uncle Sam doesn’t levy any taxes on the interest you make from such loans, which means the municipal bond interest can represent a source of tax-free income. For this reason, many financial experts advise people to purchase municipal bonds, especially as they are getting closer to retirement. This tax-free income can, in turn, be used to build your tax-free compound interest and leverage every penny you can.

See also: 3 Ways to Dodge Taxes Legally & Crazy Loopholes People Used!