How Do Tax-Exempt Bonds Work?

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Tax-exempt bonds are issued by municipalities, such as states, cities, towns and estates, and this is done in order to raise money to build infrastructure or pay for services. Find out why money earned through such bonds are tax-exempt with help from a licensed financial planner in this free video on bonds and investing.

Part of the Video Series: Bond Investing
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Video Transcript

Hi my name is Bill Rae. I'm with Alumni Financial Services. I've been in the business in financial world for well over 20 years. You're question is how do tax exempt bonds work? Well that's an excellent question. First of all let me tell you that we're not here to offer stock or bond advice in the purchasing or selling. However, bonds tax exempt and all all basically are the same thing. A bond in the finance world is a debt security issued to a holder meaning someone is borrowing money, they agree to pay you back at a certain time with a certain rate. Tax exempt bonds are issued by municipalities and states, cities and towns in other words and estates. It is their way of borrowing money to build infrastructure or to pay for services. The advantage of a tax free bond, however from the municipalities of the states means that the money you earn is not subject to the federal tax. Exciting but as in all things we advise you to make sure you understand the agreement or contract you are signing, know what you need to give, how and when your money comes back and the cost associated with it and always seek sound licensed competent advice. My name is Bill Rae. I'm with Alumni Financial Services and as always we're here to help you build wealth.

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