What are municipal securities?

1st Nov 2009 by Joseph Pousada

Municipal securities are debt instruments issued by local municipalities. The dept can be a long term bond which matures in 10 years or a revenue anticipation note maturing in 30 days for a public works project in which they expect to collect tolls in the near future. These securities are backed by the credit and faith of the local municipality so it is important to check into their credit ratings. In the United States there was a Supreme Court ruling which prevents the different levels of government from taxing each other which means that the municipal securities are exempt from federal taxes. In addition, certain states have enacted provisions that make their municipal securities tax exempt for their residences. So a person whose primary place of residence is in New York City who owns a municipal security issued by a municipality in the state of New York would have the income earned from that security be tax exempt not only at the federal level but state and city level as well.

This answer is the subjective opinion of the writer and not of FinancialAdvisory.com