Individual investors and family offices and their advisors who aren’t familiar with the inner workings of the municipal bond market may not be aware of the state-by-state tax benefits and consequences. And if their muni bond portfolios aren’t structured appropriately, they may be missing opportunities.
Consider that investors who live in high-tax states, such as California, New Jersey, or New York, benefit from municipal bonds issued by their home state because they are exempt from state income taxes. The higher in-state demand for these bonds means they typically trade at a tighter spread.
For investors who live in states with no income tax, such as Florida or Texas, there is no incentive to own bonds in their home state, so a general market / non-state-specific municipal bond portfolio typically is a better option. Investors in these states also are better off not owning bonds from high-tax states given that they would be sacrificing yield unnecessarily.
As a municipal bond specialist firm, Riverbend Capital Advisors is well acquainted with state-by-state income tax rates and well-positioned to structure client portfolios appropriately.