Tax-Exempt Bond Investing
Tax Issue

 Taxpayers pay tax on the interest income earned on taxable investments. Often the interest income is left to reinvest in the interest-earning investment. Therefore, the taxpayer is paying tax on interest earned even if the earnings are not being withdrawn and used for living expenses.

Even if the taxpayer is withdrawing the interest earnings and using this for living expenses, the interest earnings are subject to income tax. Taxpayers may be foregoing tax-free income and also may be earning a lower net rate of return on the investment when the effect of taxes is computed on the […]