How to Earn Up to 3% Yield With Municipal Bonds

Tax perks can enhance the value of muni returns even more, especially for residents of high-tax states.

Don’t be put off by these seemingly low yields. Interest from muni bonds is exempt from federal taxes. And if you buy munis issued by your home state, they’re also likely to be free of state taxes (and possibly local income taxes, too). With the top federal tax bracket at 39.6% and investment income for high earners subject to a 3.8% excise tax under the Affordable Care Act, even a modest yield on a tax-free investment looks pretty good, says Marilyn Cohen, CEO of Envision Capital Management, in El Segundo, Calif.

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Contributing Writer, Kiplinger's Personal Finance
Carolyn Bigda has been writing about personal finance for more than nine years. Previously, she wrote for Money, and is a regular contributor to the Chicago Tribune.