Triple Tax Exempt

Triple Tax-Exempt

Describing a municipal bond that is exempt from federal, state, and local taxes. The United States Constitution forbids the federal government from taxing any state and local bonds. Most states and municipalities offer tax exemptions for residents who invest in their bonds; thus, to be eligible for triple-tax-free status, a bondholder must be resident in the municipality and/or state issuing the bond. Triple-tax exempt bonds almost always offer low returns, exposing bondholders to inflation risk. See also: After-Tax Basis.

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triple tax exempt

Of, relating to, or being a municipal bond, trust, or fund paying interest that is free of federal, state, and local income taxation for individuals residing in certain localities. This situation results from the fact that most but not all states and localities exempt municipal bond interest from taxation if the bonds are issued within that particular state. Triple tax exemption is of particular interest to investors residing in high-tax states and localities, such as New York City.