Bond investing is a tried-and-true strategy for many who seek consistent income from their portfolios while potentially lowering volatility. However, one aspect that can significantly impact the returns on these investments is taxation. By considering tax-free investments, individuals can maximize their returns and minimize their tax liabilities.
Everyone wants to pay fewer taxes, right? We're all investing to meet specific goals. What we want to achieve varies from one investor to another, but one common objective is to reduce the amount of taxes paid on investment gains. Tax-free investments provide an opportunity to do just that.
As Americans pile into various higher yielding investments, it's important to know the big taxable differences between each type. Some investments, such as municipal bonds, offer tax-free income at the federal level and may also be exempt from state and local taxes. Understanding these differences can help investors make informed decisions and maximize their after-tax returns.