Tax Exempt Bonds

Tax exempt bonds are bonds that are free of either federal taxes, state taxes, or local taxes. Usually United States governmental issued bonds are tax exempt bonds. US savings bonds, for example, are tax exempt bonds. These US savings tax exempt bonds include series EE US savings bonds, series HH US savings bonds, and other US savings bonds.

What are the tax exempt bonds? What government bonds or securities’ interest is usually state tax exempt?

Interest income from “direct obligations” and bonds of the Federal Government and certain agency obligations is tax exempt from income taxation in all states (but, it is taxable at the federal level).

The table below shows tax exempt bonds such that interest on the these obligations is generally exempt from state income tax:

The following bonds are not tax exempt bonds and the interest on the following bonds is generally subject to state income tax:

• Federal National Mortgage Association (FNMA - Fannie Mae)

• Federal Home Loan Mortgage Corporation (FHLMC - Freddie Mac)