Take the 2-minute tour ×
Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It's 100% free, no registration required.

Interest received from municipal bonds is generally tax-exempt at the federal level (and at state level if purchaser resides in the issuer states). Conversely, does this mean that a purchaser cannot deduct the loss of the premium?

In other words, let's say I buy a muni with a coupon of 5% for a price of 110. If I buy 10 bonds, I will pay $11,000, but I will only receive $10,000 when the bonds mature. Do I get to deduct that $1,000 loss somewhere, or is there no offset since I'm already receiving the interest tax-free?

share|improve this question

1 Answer 1

up vote 1 down vote accepted

I found my answer here:

Because buyers of premium municipal bonds do not pay taxes on coupon income, they do not receive any tax breaks on the amortization of the premium either.

share|improve this answer

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.