Interest received on municipal bonds is taxable; this is because the bonds pay a lower rate of interest than corporate bonds. The fact that they are taxable reduces the cost of borrowing for the municipalities.

Question

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Interest received on municipal bonds is generally not taxable at the federal level, which is why they often pay a lower rate of interest compared to taxable corporate bonds. This tax-exempt status helps reduce the cost of borrowing for municipalities.

Interest Received on Municipal Bonds Is Taxable; This Is Because