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Social security and tax-free income
Q
What’s the advantage of munis if tax-free income is now being added to social security, which may make munis very unattractive?
A
James A. Klotz responds:
At certain levels, your adjusted gross income and tax-exempt interest income can cause a portion of your social security benefits to become taxable. This tax is not steep enough to provide an incentive to reduce your adjusted gross income or tax-free income.
Tax-free municipal bonds still offer higher after-tax yields to high tax bracket investors than are available on comparable quality taxable bonds.
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