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Tax-Exempt Interest

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Tax-Exempt Interest
In the United States, interest on a bond not subject to federal taxes. Generally speaking, tax-exempt interest comes from a municipal bond. It is also important to tax-efficient funds because dividends on these funds coming from tax-exempt interest are also tax free. However, tax-exempt interest is required to be reported to the IRS and may affect one in other ways, notably on eligibility for Social Security benefits.


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Treasury Department finalized regulations on the implementation of the tax-exempt interest reporting requirements, and proposed regulations on many other matters including: record retention of bond documents, use of tax-exempt private activity bond proceeds for mixed-use projects, further restrictions on payments in lieu of taxes (PILOTs), and arbitrage rebate simplification.
For example, we engaged the IRS within a week of the enactment of new tax reporting rules related to tax-exempt interest to express concerns about the effective date.
They need to consider taxable as well as tax-exempt items, such as tax-exempt interest and life insurance proceeds, which will in crease basis.
 
 
 
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