SIE practice questionmediumMunicipal Bonds - Taxation
Interest earned on most municipal bonds is typically exempt from which tax?
- ASocial Security tax
- BAll state taxes
- CAlternative minimum tax (AMT)
- DFederal income tax✓ Correct answer
Explanation
Why D — Federal income tax
Municipal bond interest is usually exempt from federal tax, though it may be subject to state taxes and AMT in some cases. Social Security tax does not apply.
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