How Do You Report Tax-Free Municipal Bonds?
To get the most tax benefit from a tax-free municipal bond, you’ll want to purchase tax-free municipal bonds that come from the state in which you reside. Municipal bonds can give you a safe return on your investment without adding to your income level. Bonds also offer a great deal of liquidity to investors who may need to sell their bonds quickly. Get Form 1099 from the bond issuers. All of your bond issuers will send you a Form 1099-INT, which will include the interest your bonds earned during the year. The totals of these forms should match what you enter on your tax forms or you will raise a red flag at the Internal Revenue Service. Enter the amount in box 8 on line 8B of Form 1040. The tax-free earning of your bonds will be listed in box 8 of Form 1099-INT. This is the amount you need to enter on line 8B of your 1040. It shows the IRS how much interested was earned without including it as part of your income total, therefore, you will not be taxed on it. Fill out Schedule D if yo
