What are the tax implications of investing in government bonds?

What are the tax implications of investing in government bonds?

Investing in government bonds can have various tax implications, including interest income being taxable at the federal level.

Are there any tax benefits for municipal bonds?

Yes, interest from municipal bonds is often exempt from federal income tax and sometimes state taxes, depending on your location.

How do capital gains taxes apply if I sell a bond?

If you sell a bond for more than you paid, the profit is subject to capital gains tax, which varies based on how long you held the bond.

What about tax-loss harvesting with bonds?

Tax-loss harvesting allows you to offset capital gains by selling bonds at a loss, which can reduce your overall tax liability.

Can I deduct bond interest on my taxes?

Generally, you cannot deduct interest from government bonds, but there are exceptions for certain types of bonds.