Tax Reporting: Municipal Bond Interest

Municipal Bonds (Munis) are interest-bearing debt obligations issued by a state or local municipality.  In general, interest paid on municipal issues is exempt from federal taxes and may also be exempt from state and local taxes in the state of issuance.  Form 1099-INT reports tax-exempt interest from municipal bonds.  Tax-exempt interest from private activity bonds, taxable for purposes of the Alternative Minimum Tax (AMT), is also reported on Form 1099-INT.  If you own shares in a municipal bond fund, nontaxability applies only to dividend distributions (capital gain distributions are always taxable).  For New York residents, municipal bond interest is also reported to New York State.

In compliance with Treasury Department Circular 230, unless stated to the contrary, any information contained in this FAQ was not intended or written to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed on any taxpayer.