With the distinct possibility of higher taxes on the horizon, should I invest in tax-exempt bond mutual funds to lessen my tax burden?
State and local governments and quasi-governmental districts issue municipal bonds to finance public projects like highways, schools, local aqueducts, civic projects and hospitals. They also offer general obligation bonds backed by the credit of the issuing state. Investing in a tax-exempt bond fund as part of a long-term investment strategy can be a rewarding approach for a person seeking monthly income. Interest paid on municipal bonds is typically exempt from federal income taxes and, in some cases, from state income taxes as well. Depending on your tax bracket, municipal bond yields are often higher than taxable bond yields on an after-tax basis. The municipal bond market still faces some challenges, including strained state and local budgets, from the 2008–2009 financial crisis, the ensuing recession and concerns about the strength of the economic recovery. Investing in a tax-exempt bond fund, which typically contains hundreds of bonds from different sectors, is a much simpler app
