Should You Invest in Build America Bonds?
Investors have a new mechanism for investing in municipal bonds, courtesy of the American Recovery and Reinvestment Act of 2009. As part of the Obama administration’s economic stimulus program, the bill authorized a subsidy for local and state governments that issue what are known as Build America Bonds (BABs) to finance capital expenditures.
Unlike most municipal bonds issued by a state or local government, the interest payments on a Build America Bond are taxable on your federal income tax return. However, the federal government subsidizes 35% of the interest payments on a BAB, which typically have relatively long maturities and …
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