Municipal Bond Forum
Diversification advantage for investors in states with no income tax
Q
Most of my munis are in Texas, where we have no state income tax. I do have bonds in Tennessee, Colorado, California and Wisconsin, which do collect state income taxes. I need to know what the standard deduction is in each state so I know if I even need to file and how many more bonds I can reasonably own in each state without creating tax reporting tasks for myself.
A
James A. Klotz responds:
As a Texas resident, you can own bonds issued in other states with no state tax incidence in those states. It is for this reason that tax-free bond investors who reside in states without income taxes, such as Texas and Florida, have a distinct advantage in diversifying their portfolios.
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