What is a Muni bond?

A municipal bond, commonly known as a muni bond, is indeed typically a tax-exempt investment that represents a loan made by an investor to a state, municipality, or county. These bonds are issued by local government entities to fund public projects such as the construction of schools, highways, and other infrastructure. The interest earned on muni bonds is often exempt from federal income tax, and in some cases, state and local taxes as well, which makes them an attractive option for investors seeking to minimize tax liability. They are generally regarded as lower-risk compared to many other types of investments, particularly because they are backed by the credit and taxing power of the issuing government entity. This combination of features makes them a popular choice for income-seeking investors, particularly those in higher tax brackets.