Income Beginner: Taxes in Bond Investing

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1.
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.
2.
Of the following tax brackets, which one will leave you with the highest yield on a municipal bond compared to a taxable bond?
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35 percent. The higher the tax bracket, the more you earn when the bond is compared to a taxable bond.
3.
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.
4.
The amount of one's original issue discount interest can be found on Form 1099-OID.
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True. Form 1099-OID exists just for this purpose.
5.
The tax advantages of Series EE and Series I bonds include all of the following except _______.
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No federal tax on earnings. Unless the bonds are owned by your child or special exclusions for educational expenses apply, you must pay federal taxes on the earnings of your Series EE and Series I bonds. State and local taxes, however, are not paid.
6.
When both federal and state taxes are accounted for in the formula for taxable equivalent yield, the yield rises.
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True. When more than one tax is involved, it will rise.