I would like to hear some ideas on the feasibility of tax exempt investing compared to regular investing. ie. paying 22% (Lt fed. tax + 7% state tax) on an investment making 10% per year, to tax exempt investment payinng say
What are the other considerations other than putting a pencil on the figures?
Your only real tax exempt investments are:
If you go with muni bonds here is the equation to figure out if it's worth it. Take the yield of the bond or bond fund and divide it by 1- your tax bracket. So if the yield was 3.5% and your tax bracket was
25% it would look like this: 3.5 / 1-.25 = 4.6 so in this case you would need to find an investment yielding 4.6% before tax to equal the 3.5% bond that is tax exempt. Hope this helps.You should look at total gain after taxes. I'd rather pay 30% (inc state) on a 20% gain rather than nothing on a 4% gain.
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