The announcement came on yesterday, the same day the state began pricing the tax-exempt and taxable bonds.
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The bond program, set to expire Dec. 31, provides federal subsidies for taxable bonds issued by state and local governments.
Thus, owning taxable bonds like Treasurys while carrying credit card debt makes little fiscal sense currently, and will become even more disadvantageous going forward.
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But with the Federal Reserve keeping interest rates low, taxable interest fell 17%, a big hit to retirees who rely on interest from bank CDs or taxable bonds.
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Because taxable bonds carry higher yields than tax-exempts, the idea was that Treasury would give state and local governments direct cash subsidies to partially offset their extra borrowing costs.
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If, instead, they cash in bonds and certificates of deposit, and then invest the proceeds in taxable bonds in a 529, they haven't altered their overall asset allocation, but have improved their tax situation.
Like BABs, AFF Bonds would be conventional taxable bonds issued by State and local governments in which the Federal government makes direct payments to State and local governmental issuers in a subsidy amount equal to 28 percent of the coupon interest on the bonds.
But many families can wring even more tax savings from a 529 by investing it all along in taxable bonds--whose interest would otherwise be taxed at a federal rate of up to 40% (including the effect of an itemized deduction clawback)--and holding index funds or individual stocks in their taxable accounts, says Yale School of Management professor Matthew Spiegel.
The income from taxable Build America Bonds is subject to it, however, as would be capital gains from trading munis.
Interest on savings bonds is taxable at the federal level and exempt at the state level.
Unlike most municipal paper, these bonds were taxable and priced at par to yield 8% to maturity in 2006.
Tax free municipal bonds, or even tax deferred, fixed annuities, may be more tax friendly than corporate bonds and taxable CDs .
Stop buying assets that throw off taxable income, like junk bonds and shares of Verizon.
Interest income on these bonds is not taxable, giving them a distinct advantage in the financial marketplace.
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Do you have a bunch of appreciated bonds in your taxable portfolio?
If the project performs as the city expects over the 25-year term of the taxable and tax-exempt bonds, the developers will be repaid their principal and earn an interest rate ranging from 6% to 9%, said Rodney Crim, executive director of the St.
Similarly, fixed-income securities held in taxable accounts can be shifted to municipal bonds, which may provide higher after-tax yields.
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Thanks to the magic of bond-premium amortization, that maneuver reduces your taxable interest income over the life of the bonds.
Golub was incredulous that this provision would apply to interest on tax-exempt bonds, which could become partially taxable under the proposal.
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For taxable accounts, he favors tax-free municipal bonds, which aren't subject to the new tax.
These people have tax-free bonds because their net yields are better than taxable fixed-income instruments, also taking into account the financial strength of the issuing entities.
The payoff for putting up with these hurdles is a potentially higher tax-adjusted yield. (Muni bonds offer tax advantages over other types of bonds and are most beneficial when held in a taxable account.) You may have to dig, but short-term fears can create opportunities for those who are astute and selective.
The rest of his taxable holdings run the gamut of corporate, municipal, asset-backed and mortgage-backed bonds.
In April 2007, five-year insured muni bonds were yielding 4%, significantly less than the 4.7% offered on taxable five-year Treasuries.
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