These Tax-Free Bonds Turn a 4% Yield Into 7.5% (Here’s How)

The 10-year Treasury is storming past 1.6% yet again. Look out, high yield! I kid because I love (income). And one-point-six just doesn’t do it for me. Plus, remember, this bounty does not escape the tax man. Any interest income we earn from Treasuries—no matter how sad—is subject to federal and state taxes. So, if we’re multiplying a nest egg (let’s use $500K) by 1.6%, we must remember that the final answer is probably not $8,000 in annual income. Because if we’re raking in income from any other sources, we should lop off a chunk of this for taxes. Interest Received is the official IRS tax term, for my fellow tax wonks.… Read more