What Are Tax-Free Bonds?

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Tax-free bonds are bonds that are issued by towns, cities, local governments and state governments to raise money for infrastructures, schools and general operations. Learn about the tax-free returns received from tax-free bonds 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

Hello my name is Bill Rae. I'm with Alumni Financial Services. I've been in the business of the finance world for well over 20 years. Your question is what is a tax free bond. That's an excellent question. I suppose we should start by saying a bond in the finance world is a debt security in which an authorized issuer owes the holder a debt, a fancy way of saying someone who borrows money, owes somebody and agrees to pay them in a certain time at a certain return of their money. Now tax free generally refers to immunity bonds, municipal bonds, bonds that are issued by cities, towns, local governments, state governments in order to raise money for infrastructures, for schools and for paying the general operations. What all that means is they raise money to take care of business they borrow it from you, you get a return on your money and that return referred to as interest you don't have to claim on your federal taxes. So it is a vehicle that you can use in planning for retirement or wealth building. We always advise that you understand whatever agreement or contract you are signing, know what is expected of you, know when and how you can get your money back and what returns you should expect on your money and as always we advise that you sit down with a sound competent licensed adviser. 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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