Investments that pay interest
Interest-paying investments lend your money to a bank, government or company in return for regular payments. Here are the main types and how their interest is taxed.
The main types
- Savings, money-market accounts and CDs – taxed federally and by your state.
- Treasury bills, notes, bonds, TIPS and I bonds – federal tax only.
- Municipal bonds – often free of federal tax.
- Agency and company bonds – taxed federally and usually by your state.
- Bond and money-market funds – tax follows what they hold.
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Sources
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