Municipal bonds’ income is almost always federal-tax free and, in most cases, free of state taxes, too.


Arizona Municipal Bonds

The Advantages of Tax Exemption:

Under present federal income tax law, the interest income you receive from investing in municipal bonds is free from federal income taxes.* In most states, interest income received from securities issued by governmental units within the state is also exempt from state and local taxes. In addition, interest income from bonds issued by U.S. territories and possessions is exempt from federal, state and local income taxes in all 50 states.

One of the best ways to appreciate the tax-exempt advantage of a municipal security is to compare it to a comparable taxable investment. For example, assume you are in the 33% federal tax bracket, file a joint return and with your spouse, claim $250,000 in taxable income.

Now assume you have $1000,000 to invest and you are considering two investment alternatives: a tax-exempt municipal bond yielding 3.5%, and a taxable corporate bond yielding 4.50%. Which investment will prove most advantageous in terms of after-tax income?

If you invest your money in the municipal bond, you’d earn $3,500 in interest (a 3.5% yield) and not pay any federal income taxes, also avoiding state tax if buying bonds from your state of residence. The taxable bond investment, however, would provide you $4,500 in income. After federal income taxes had been deducted, that net income would be $3,015 (a 3.01% yield) before the consideration of state taxes which would obviously reduce it more.

*If you are subject to the Alternative Minimum Tax (AMT), you may have to include interest income from certain municipal securities in calculating your income tax.

"Muni" Bond Basics

Municipal Bonds (also known as "munis") offer individuals the opportunity to invest in state and local government projects that have an impact on our daily lives, including schools, highways, hospitals, housing, and sewer systems. The income payments generated by munis are generally exempt from federal income taxes.

Arizona State Munis (and those issued by other states) are typically exempt from state tax if purchased by residents of the same state. Some, but not all, state munis are also exempt from local taxes.

Munis come in many forms, e.g.,

  • long-term fixed rate bonds

  • short-term notes

  • adjustable-rate securities (such as variable rate demand obligations, auction rate securities, et al)

  • zero-coupon bonds

  • taxable securities

Arizona Municipal Bond Specialists

We can help you diversify your portfolio with tax-exempt Arizona muni bonds. Municipal bonds are important retirement tools.

High-quality bonds can add tax-exempt, stable income to a well-diversified portfolio. Over time, the value of these bonds will fluctuate, but the interest payments remain constant. In addition, Arizona Municipal Bonds fund a wide variety of projects and offer a broad range of terms, maturities, and quality ratings.

However, like any investment, muni bonds carry certain risks and may not be appropriate for every investor. It is important that you work with an Advisor that can help you understand the specific terms and risks of the bond you are considering. and the stability of the issuer.

Moors & Cabot, the Arizona Municipal Bond Specialists, can help you select Arizona tax-free bonds that meet your personal needs and risk parameters.


Brad East and his experienced bond professionals operate a full-scale municipal trading desk for Arizona tax-free bonds right here in Phoenix. They have the knowledge, insights, and contacts needed to trade the highest quality cities, school districts, and municipalities within the State. but also to have an in-depth comprehension of each specific bond issue. Head trader, Jim Blackwell has over forty years of experience with Arizona municipal bonds and is widely regarded as the very best trader in the muni space for Arizona.

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