Tax - Free Investments In Frisco, Tx: The Basics Of Municipal Bonds
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If you are looking for tax-free investments in Frisco, TX, you should consider municipal bonds. Municipal bonds or ‘muni’ bonds have long been an attractive investment option for people who are tax-sensitive because they are free of most federal taxes and many state taxes. In addition, muni bonds have lower price volatility than many comparable taxable bonds, which means they are less likely to have rapid or frequent changes in value.

What A Municipal Bond Is

Basically, a bond is a loan to a borrower and in the case of municipal bonds, the borrower is a city, county, state or school district. The city or other municipality borrows money from bondholders, usually starting at $5,000, going up in increments of $1,000, and makes fixed payments to the bondholders twice a year. At the end of the loan period, the borrower pays the principal back to the bondholders.

Types Of Tax-Free Municipal Bonds

Short-term municipal securities are usually called ‘notes’ and mature in one year or less. Bonds are long-term securities that mature in more than one year. Notes are generally issued by the borrower to raise money for short-term needs like meeting unanticipated budget deficits and raising quick capital for certain projects until long-term financing can be arranged. Bonds are generally issued to finance capital, or infrastructure, projects over a long term. There are two types of bonds that can be issued and they are general obligation bonds, which are funded by tax revenues and must normally be approved by voters, and revenue bonds, which are funded by money generated by the project financed with the bond.

When Muni Bonds Are Taxable

Though most municipal bonds are great tax-free investments in Frisco, TX, there are two situations in which the income you receive from your bonds can figure into your federal income tax picture:

▪ If you are subject to the Alternative Minimum Tax (AMT), any ‘private activity’ bonds you hold can be

included in your income. Private activity bonds include bonds to fund hospitals, stadiums, housing

projects and more.

▪ If you receive social security benefits, profits made from your bonds, though not directly taxable, must

be figured into your modified adjusted gross income, which is a figure that is used to determine how

much of your social security benefits are taxable.

To find out about municipal bonds and other types of tax-free investments in Frisco, TX, call Jason Graziani at (972) 992-1920.


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