Is there any benefit to having one over the other? Does one get you more money?
2007-10-30 07:27:58 · 6 answers · asked by Yoni 1 in Business & Finance ➔ Taxes ➔ United States
If you don't know the difference, give your money to someone more competent who can tell the difference. Give your money to a 5 year old to invest for you.
2007-10-30 09:18:52 · answer #1 · answered by Anonymous · 0⤊ 1⤋
With a taxable zero coupon bond, you pay tax each year, which is calculated using the rules for "original issue discount". With a tax free zero coupon bond, you do not pay tax (except for capital gains tax, if you sell it for more than your basis). Therefore, if everything else is the same, the tax free is better (for you, and worse for the IRS). However, the tax free usually pays you less money for the same investment, so it may be better or worse for you (after subtracting the taxes from what the taxable pays you).
2007-10-30 09:34:49 · answer #2 · answered by StephenWeinstein 7 · 0⤊ 0⤋
Each is better for some people, worse for others. I suspect you would be better off with the taxable variety because you do not appear to be in a position to earn enough to overcome the drawbacks of tax free interest.
2007-10-30 09:43:36 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Tax free bonds are tax free. Taxable bonds are taxable.
2007-10-30 09:16:09 · answer #4 · answered by Anonymous · 1⤊ 0⤋
Tax fee bonds are issued by states and municipalities. By law they are exempt from federal income tax and may be exempt from state income.
The tradeoff is that they generally pay a lower interest rate.
2007-10-30 07:34:19 · answer #5 · answered by Wayne Z 7 · 1⤊ 0⤋
Are you serious? What is the difference between taxable and tax free? Puhleeze!
Tax free, oddly enough, means tax free! No tax on the income.
Taxable means -- well, what do YOU think it means?? Right! The income is TAXABLE!
2007-10-30 07:36:07 · answer #6 · answered by Bostonian In MO 7 · 2⤊ 2⤋