A little-noticed change in the new economic recovery law could have a major impact on high-income investors such as yourself.
Strategy: Include municipal bonds in your portfolio. Previously, most munis provided tax-free income, but certain types of bonds, known as “private activity” bonds, could trigger alternative minimum tax (AMT) complications. The new law temporarily eliminates the AMT problem.
What’s more, municipal bonds have been more lucrative lately, with yields flirting with the 6% mark earlier this year. At one point, the yields for 10-year munis exceeded those for comparable Treasury securities.
Want to hear more? For starters, investing in municipal bonds can be a triple tax winner:
1. Muni interest generally is exempt from federal income tax. Therefore, even if a muni’s yield is lower than a comparable taxable investment, the actual return may be greater. Example: If you’re in the 28% tax bracket...(register to read more)
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