Tax-smart investing – For income-seekers, municipal bonds may be worth a look

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Abstract: Municipal bonds (often referred to as “munis”) can be attractive to income-seeking investors because they provide an income stream exempt from federal and, in certain cases, state and local income taxes. As this article explains, they traditionally have been of greatest use for upper-income taxpayers, but they are not without risks, such as vulnerability to higher interest rates and the risk that a bond issuer won’t be able to repay its debts. A sidebar shows how to compare taxable and tax-free bonds.