Glossary of Municipal Securities Terms

TAX-EXEMPT BOND

municipal security the interest on which is excluded from gross income for federal income tax purposes. Such interest may or may not be exempt from state income or personal property taxation in the jurisdiction where issued or in other jurisdictions. If interest on the bond is also exempt from state income tax, it is described as “double exempt” and if such interest is also exempt from municipal, local income or other special taxes it is described as “triple exempt.” In some cases, interest on the bonds is subject to the alternative minimum tax. Interest on some municipal bonds is not exempt from federal, state or local taxes. Compare: BUILD AMERICA BONDS; DIRECT SUBSIDY BONDS; TAX CREDIT BONDS; TAXABLE MUNICIPAL SECURITY.

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