Jun 10
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Tax Free Money? Take advantage of IRS 8b payouts
Interest on state and local bonds (i.e., obligations of a state, the District of Columbia, a U.S. possession, certain Indian tribal governments or any political subdivision of the foregoing) is exempt from federal income tax. You can take advantage of the special tax treatment of interest income from earned on state and local bonds. Even though the interest from these sources is tax exempt, it must be reported on line 8b of your federal income tax return, thus “IRS 8b payouts.”
You also need to consider the other tax implications of tax exempt income. Even if interest isn’t subject to federal income tax, it may have to be taken into account, e.g., in calculating the taxable portion of social security benefits or determining if you must pay the alternative minimum tax.
Seven states are constitutionally required to make these interest payouts prior to paying any other debt. These states are NY, GA, WA, MN, NM, NV and MD. You don’t have to live in these states to be able to buy their bonds, so take advantage of this opportunity!
Get more information in our members only section, including the taxation of other states interest in your state.
For questions or more information, contact us or call us at 404-944-3172.
