The interest paid on a loan used to acquire municipal bonds is not deductible.

Name: The interest paid on a loan used to acquire municipal bonds is not deductible.
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According to IRS rules, the interest expenses on a loan used to purchase tax-exempt securities such as municipal bonds are not tax-deductible. This is because the income from the municipal bonds is tax-free, so deducting the interest expenses would result in a double tax benefit.

The Interest Paid on a Loan Used to Acquire Municipal