Securities issued by municipalities, such as cities, towns, states, and school districts, pay interest that, under law, is exempt from federal income taxes.

Question

Quizplus · Accepted Answer

Municipal securities, also known as municipal bonds, do indeed pay interest that is exempt from federal income taxes, as long as the bondholder is a U.S. citizen or resident and the bond was issued by a municipality within the United States. However, it's important to note that while the interest is exempt from federal taxes, it may still be subject to state and local taxes depending on the state where the bondholder lives.

Securities Issued by Municipalities, Such as Cities, Towns, States, and School