Income Beginner: Taxes in Bond Investing

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1.
What does taxable equivalent yield tell you?
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How much you'd have to earn on a taxable bond to equal what you are earning on a municipal bond. You can use the formula to figure out whether to buy a municipal or a taxable bond.
2.
To qualify for the tax exclusion offered through the Education Bond Program, you must ______.
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Be at least 24 years old at the time you purchase your bond. To qualify for this program, an adult age 24 or older must buy the bonds.
3.
If you know your tax bracket, you already know the taxable equivalent yield on your municipal bond.
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False. You will need to know the yield on the municipal bond in question.
4.
Assume that you are in the 32 percent federal tax bracket and you pay a 5 percent state tax. What will be your taxable equivalent yield on a municipal bond earning 4 percent?
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6.19 percent.
5.
You don't have to pay state income taxes on interest earned from Treasury inflation-adjusted securities.
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True. You are exempt from state income taxes on interest earned from Treasury inflation-adjusted securities.
6.
If you buy a premium bond, you may have to report original issue discount interest on your tax return.
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False. You may have to report interest from original issue discounts if you buy a discount bond, not a premium bond.