Municipal bonds are debt obligations issued by states and local governments to raise money for general purposes or to finance a specific project. Municipal bondholders receive a fixed tax-free interest payment semi-annually with the return of their principal on a specific maturity date. Unless otherwise specified, municipal bond obligations are exempt from all federal income taxes, and most are also exempt from state and local taxes in their state of issuance. Learn more

 

Corporate bonds are debt obligations, issued by corporations. When you buy a bond, you are actually lending money to the corporation that issued it, which promises to return your principal, on a specified maturity date. Until that time, they pay you a stated rate of interest; whether monthly, quarterly or semi-annually. Of course, the income interest you receive from corporate bonds is taxable. Learn more

A very tiny portion of municipals are taxable debt obligations. They are an outgrowth of the Tax Reform Act of 1986, which put certain restrictions on the issuance of traditional Tax-Exempt Securities. A taxable Municipal Bond is issued as a Private Purpose Bond to finance Public Purpose projects where the 10% private use limitation has been exceeded. Learn more