3 Tax-Free Ways To “Front-Run” The Biden Infrastructure Boom

  • Date: 02-May-2021
  • Source: Forbes
  • Sector:Economy
  • Country:Middle East
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3 Tax-Free Ways To “Front-Run” The Biden Infrastructure Boom

Infrastructure spending is back in vogue, and we've got a chance to grab a piece of it tax-free. That would be through municipal bonds, investments most people see as sleepy (though I have no idea why) but are poised to roll as President Biden's $2-trillion infrastructure package (or some version of it) becomes law. That's because the law will usher in an explosion of new "muni" bonds—and there are select actively managed closed-end funds (CEFs) ready to pick up the best ones. By buying them now, we can nicely front run this muni-bond wave. The best part of buying muni bonds (which are issued by states, cities and some non-profit entities, like hospitals, to fund infrastructure) is that the income they generate is 100% tax-free. This boosts the yield these funds offer considerably, especially if you're in a higher tax bracket. For instance, a municipal-bond yield of 3. 8% may not sound like a lot (although in today's market, 3. 8% is still generous, since it's over twice what you'd get from the S&P 500), but it's the same as getting a 5. 1% yield from dividend stocks if you earn $100, 000 per year, thanks to their tax-free status.