Single-state municipal bond fund

A mutual fund investing only in government obligations within a single state, with state tax-free dividends, but taxed capital gains.

Single State Municipal Bond Fund

In the United States, a mutual fund that invests exclusively in municipal bonds issued in a single state. The returns from such a fund are exempt from all federal taxes and all state taxes if the bondholder is a resident of that state. A single state municipal bond fund is attractive to locals and encourages them to invest in the fund. It is particularly important in states such as New York, with large populations, and states with high capital gains taxes, such as Oregon.

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While investors in municipal funds need to be vigilant when assessing the specific-credit risks of any government obligation, those invested in single-state municipal bond funds are keenly exposed to single-state risks.

Reevaluating state-specific muni bond funds

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