A municipal bond is a bond issued by a city, county, or state government. A government body issues a municipal bond to finance its operations or projects. Interest earned on a municipal bond is usually free of federal income taxes and is generally tax-free in the city or state where it is issued. A municipal bond exists in one of two forms: general obligation bond, which funds projects that don't produce revenue (such as street lights); or revenue bond, which funds projects that do produce revenue (e.g., stadiums and toll roads). In the former type of municipal bond, interest payments are derived from general tax revenue. In the latter municipal bond, interest comes from the revenue produced by the project. |
