Advantages of investing in municipal bonds from the point of view of taxpayers
Higher interest rates compared with deposits from banks
Since municipal bonds are secured by public projects, investors are guaranteed a high rate of return if they invest in municipal bonds relative to the interest rates that their money would have received if it had been held as savings in a bank (Brown, 2016). No federal tax on profit generated from municipal bonds
The downside of many investments is usually high federal and or state taxes charged on all profits made. Municipal bonds profits accrued aren’t taxed hence investors are cushioned against loss of money via federal tax (and state tax if they reside in the location they invested in).
Less risk of loss of value/ defaulting
Federal governments rarely if ever default on repayments of bonds as compared to corporate entities that offer bonds.
Brown, J. (2016, August 15). The Pros and Cons of Municipal Bonds. Retrieved from U.S.NEWS: http://money.usnews.com/investing/articles/2016-08-15/the-pros-and-cons-of-municipal-bonds