Tax Free Investments Frisco Tx
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Tax Free Investments Frisco Tx

tax free investments frisco txTax-free investments Frisco TX are a great way to save money for your retirement, your children’s college fund, or any other important financial need. Municipal bonds, or “munis” for short, let people invest without having to pay federal tax on the income. In some cases, munis are exempt from state and local taxes as well.

Local and state governments often issue debt securities to raise capital for different municipal projects. Tax-free investments and municipal bonds are often used interchangeably in financial circles.

Tax-Free Investments Frisco TX: Types of Municipal Bonds

Revenue bonds and General Obligation Bonds (GOs) have interest payments funded by different sources. Revenue bonds finance local transportation or utility projects (such as building a new highway). These munis are backed by the revenue from the local building or transportation projects they represent. General obligation bonds finance government operations. The GO bond issuer can raise taxes to make principal and interest payments if needed. Revenue bonds are considered the riskier option for investors.

States or municipalities often issue tax-free bonds to help fund private development projects that may boost local economies. Called “private activity” bonds, they’re exempt from federal income tax, but investors may need to pay the alternate minimum tax.

Tax-Free Investments Frisco TX: Yields and Risks Associated with Municipal Bonds Frisco TX

Municipal bonds are issued for many different purposes, and offer varying maturity dates and yields. Some tax free bonds are short-term and dependent upon tax receipts or similar revenues. They offer low yields because of their quick maturity dates. Major building or transportation projects offer long-term munis providing investors with higher yields. In both instances, coupon payments have a changeable floating interest rate or a fixed rate, depending on the specific bond.

Munis, like all investments, come with credit and interest rate risks. The interest rate on the bonds may rise or fall. Bond prices fall when interest rates rise, and increase when the interest rates fall. The longer you have to wait for a municipal bond to mature, the more apt it is to experience interest rate fluctuations. A credit risk involves the bond issuer not making scheduled interest or principal payments due to a weak economy or reduced tax revenue. This doesn’t occur very often, but it’s important to keep track of the ratings given by credit agencies to municipalities. Large cities, including Chicago, have been plagued by poor municipal bond ratings in recent years.

If you’re considering tax free investments Frisco TX, Jason Graziani offers financial consulting for families, couples and individuals. Worried about saving money for your retirement or your kids’ college education? Jason can help you decide on the best investments for your needs. Call today at 972-992-1920 to learn more.


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