Monday, May 18, 2009

Tax Free Income Stocks

Concerned about taxes? Looking for income? Check out tax free income stocks. There are many stocks, which are primarily closed end funds, which pay dividends that are tax free. This tax free income is generated from municipal bonds in the portfolio.

Municipal bonds are issued by states, counties, cities, and other governmental agencies. Income from those bonds is exempt from Federal income taxes, and if the bonds are issued in your state of residence, the income is exempt from state income taxes also. Municipal bonds issued by Puerto Rico and other U. S. dependencies are exempt from state income taxes also for residents of most states. There are over 200 different tax free income stocks according to, many of which yield over 8%.

One of the highest yielding tax free stocks is Pioneer Municipal High Income Advantage Trust (MAV), which yields 9.2% from its portfolio of both investment grade and below investment grade municipal bonds and notes. Its governmental agency bonds include airport, education, healthcare, insurance, pollution control, tobacco, transportation, utilities, housing, water, and industries. They have been paying monthly dividends since 2003.

If you live in California, you might want to consider the Van Kampen California Value Municipal Income Trust (VCV) which yields 8.4%. They mostly invest in California investment grade municipals. The fund was founded in 1992 and pays dividends monthly.

Van Kampen also has a high yielder for Massachusetts residents, the Van Kampen Massachusetts Value Municipal Income Trust (VMV), which pays 6.9%. The fund invests in Massachusetts municipals including bonds for education, general purpose, and water and sewer. They have paid monthly dividends since 1995.

There is also their Van Kampen Pennsylvania Value Municipal Income Trust (VPV), which yields 7.0%. This holder of Pennsylvania municipal securities has been paying monthly dividends since 1995.

For you New Yorkers, there is the BlackRock New York Municipal Income Trust (BNY) which pays 7.6%. It invests in New York education, hospitals, housing, pollution control, tobacco, transportation, and water and sewer bonds. It has paid quarterly dividends since 2001.

You can download a free Excel database spreadsheet list of over 200 tax free stocks at Keep in mind that both yields and share prices fluctuate, and there is the possibility of bonds in the portfolios defaulting.

Author does not own any of the above.


1 comment:

Stock Lurker said...

I don't care what they say about not needing tax free stocks unless you have a high income bracket.

It is just nice seeing that line from your broker at tax time saying "Tax Exempt Dividends: $#####"

I'm sure it will be worth over the long haul.