Municipal bond interest
One of the appeals of investing in municipal bonds is that the interest is tax-free at the federal level and generally at the state level, too, for bonds issued in the taxpayer’s home state.
But nontaxable muni bond interest is included in the modified adjusted gross income calculation used to determine whether a high-income Medicare beneficiary must pay a monthly premium surcharge, and profits from the sale of a bond are subject to capital gains taxes.
