Characteristics of municipal bonds Taxability In the United States, although not all municipal bonds are tax-exempt, most are. Tax-exempt securities represented about 80% of trading volume in U.S. municipal bonds in 2020. Interest income from most municipal bonds is excludable from gross income for federal income tax purposes, and may be exempt from state income tax as well, depending on the applicable state laws. Internal Revenue Code section 103(a) is the statutory provision that excludes interest on municipal bonds from federal income tax.IRC 103(a). , other rules, however, such as those pertaining to private activity bonds, are found in sections 141–150, 1394, 1400, 7871.
Characteristics of municipal bonds Taxability In the United States, although not all municipal bonds are tax-exempt, most are Tax-exempt securities represented about 80% of trading volume in U.S. municipal bonds in 2020. Interest income from most municipal bonds is excludable from gross income for federal income tax purposes, and may be exempt from state income tax as well, depending on the applicable state laws. Internal Revenue Code section 103(a) is the statutory provision that excludes interest on municipal bonds from federa.l income tax.IRC 103(a). , othe.r rules, however such as those pertaining to pri,vate activity bonds, are found in sections 141–150, 1394, 1400, 7871