How to Purchase Municipal Bonds

By eHow Personal Finance Editor

Rate: (7 Ratings)

Investing in municipal bonds can be attractive. Earned interest is not taxed federally (though it can make you subject to the Alternative Minimum Tax). Under certain conditions, it is not taxed by state or local governments either. Munis are a relatively safe and liquid investment.

Instructions

Difficulty: Moderately challenging

Things You’ll Need:

Step1
Decide whether you want to buy a new issue or an issue that is already outstanding. Many securities dealers sell both types.
Step2
Research the bond issue. Web sites such as www.bondmarket.com and www.investinginbonds.com offer information on prices and yields.
Step3
Call a dealer or banker who is registered with the Municipal Securities Rule-Making Board. There are 2,700 registered municipal bond dealers nationwide.
Step4
Tell the dealer which issue interests you. You might need to open an account with the dealer before you proceed.
Step5
Ask for a prospectus or offering statement that deals with the issue of interest.
Step6
Decide whether the risks, features and terms of the issue suit you.
Step7
Estimate the tax benefits you will get as a result of investing in the bond. Does it provide a better deal than you could get with other types of investments?
Step8
Call the broker and ask to invest in the issue.
Step9
Remember, the minimum investment in a municipal bond issue is usually $5,000.

Tips & Warnings

  • If your income is $50,000 a year and you're filing a joint tax return, a 6 percent tax-free yield is equal to a taxable yield of 8.3 percent.

Post a Comment

POST A COMMENT

Request a New How-To Article

Looking for more How To information? Chances are there’s an eHow member who knows how to do what you’re looking to do. Submit an article request now!

eHow Article:  How to Purchase Municipal Bonds

eHow Personal Finance Editor

Related Ads

Personal Finance

mpcussen
Meet Mark Cussen eHow’s Personal Finance Expert.