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Are municipal bonds subject to the Alternative Minimum Tax?

Certain municipal bonds are subject to the Alternative Minimum Tax (AMT), so it s essential to understand which types of bonds are subject to it, and how to avoid such securities if you so desire. Intro to AMT Alternative minimum tax, or AMT for short, is an additional tax that is paid on top of income tax.

Are municipal bonds subject to the Amt?

Under the Tax Reform Act of 1986, as stated before, interest received on private purpose municipal bonds is classified as being subject to the AMT. In addition to being subject to the AMT, municipal bonds can head south during bear markets just like any other asset class.

How will the new tax law affect municipal bonds?

Effectively, that means the yield on a municipal bond paying 3.50% would drop to roughly 2.6%. The 2017 tax law increased the AMT exemption as well as the phase-out thresholds, meaning fewer filers will be subject to AMT under the new tax laws. The phase-out threshold is $1,218,700 for 2024 for married filing jointly.

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