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It’s my understanding that under the new tax rules, those in higher brackets may get hit twice on “tax-free" income. If modified adjusted gross income rises above $200,000 for a single filing taxpayer, a 3.8% surtax is imposed on all investment income, regardless of source
- R.C Illinois
I'm afraid we differ on both counts.
According to our tax professionals, your tax-free income is not included in the calculation of the Affordable Care Act’s 3.80% surcharge.
Additionally, your tax-free income does not become taxable regardless of how substantial it may be, as long as you are filing by the conventional method, rather than the Alternative Minimum Tax (AMT) method.
Please consult your tax professional regarding your specific situation.
If I buy only insured muni bonds, do I still need to be concerned with the bonds' rating?
- G.E., Louisiana
As an investor, you should always be the one who determines the degree of security you are comfortable with, based on your personal risk tolerance.
As you know, most "investment-grade" rated municipal bonds provide an adequate degree of security, as evidenced by their very low default rate.
Insurance provides an additional layer of credit quality, but it is always prudent to evaluate the underlying security.
I have many Puerto Rico munis and they are insured by Assured Guaranty. If the commonwealth restructures these bonds, what will happen afterward? Will I lose value? Will the insurer pay me back what I lose?
- B.C., California
Assured Guaranty, as all insurers, is responsible for making the full interest payments and principal at maturity. The insurance companies, however, are not obligated for any loss of market value in the interim.
This report is produced solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This report is based on information obtained from sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed.