For many high earners, municipal bonds may be worth it because their tax-equivalent yield can exceed that of Treasuries. A 3.5% muni yield, for example, equals roughly 5.5% on a taxable-equivalent basis for someone in the 37% federal bracket plus the 3.8% net investment income tax. Be mindful of private-activity bonds subject to the alternative minimum tax (AMT) and differences in credit quality. A separately managed account may offer greater control over cost basis and customization. Pairing the right muni strategy with your tax picture may meaningfully boost your after-tax income.
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