Bonds are sometimes used as an investment vehicle, but as with any investment, there are tax considerations as well. The interest you receive from corporate bonds may be taxable, which means that those taxes impact a portion of your earnings. In addition, savings bonds and government-issued Treasury bonds may be exempt from state and local taxes, but they may be taxable on the federal level. On the other hand, municipal bonds may be tax-exempt on the federal level, but they may be taxed at the state and local level.
With this being said, it’s always important to understand the tax implications of your investments. After all, it’s not about what you make – it’s about what you make after taxes!
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov[9]
[9] IRS.gov, July 23, 2020
