How to Earn 5% Tax Free on Your Money

New York Tax Free Municipal Bond

We are in the midst of tax season right now, and many investors are looking at the interest and dividends showing up on their tax returns. It would be great if you could convert that taxable income into non-taxable income. The best way to get tax free interest is from municipal bonds.

You have a couple options: one is to owns the bonds directly and the other is by purchasing municipal bond closed end funds, often referred to as tax-free CEFs or tax-free stocks. These CEFs own municipal bonds that pay interest which is exempt from Federal income taxes and may be exempt from state income taxes if issued in the state you live in or issued by one of the US territories, such as Puerto Rico, the Virgin Islands, or Guam. Municipal bonds are usually issued by states, counties, cities, and other governmental entities such as school districts, sewer districts, bridges, and water and power departments. WallStreetNewsNetwork.com has list of over 100 tax-free income CEFs, and more than 85 with yields more than than 5%.

The advantages of these CEFs are numerous. Almost all of them pay dividends on a monthly basis, whereas, if you by an individual bond, the interest is paid semi-annually. CEFs have no minimum investment, whereas municipal bonds are sold in $5,000 denominations and many brokers have minimum purchase requirements of $15,000 to $25,000. You also have better liquidity with CEFs as prices are quoted real time and quotes are immediately available on the Internet, unlike individual bonds. In addition, CEFs provide diversification by owning many bonds in the portfolio. One other advantage is that you can often buy many of these CEFs at a discount from net asset value.

The Nuveen Insured Municipal Opportunity Fund (NIO) pays a generous yield of 6.0% and is selling at a 7.9% discount. The Net Asset Value, also known as the NAV, is the intrinsic value of the shares if the entire fund were liquidated and all the funds distributed among the shareholders. The leverage ratio is 36.84%, about average of the ratios of all the leveraged muni CEFs. The management fee is 0.63%.

The Dreyfus Strategic Municipal Bond Fund (DSM), founded in 1989, also yields 6.0%, and is selling for a 4.3% discount to Net Asset Value. The fund does utilize some leveraging, currently 31.27%, which is a bit lower than many other tax free CEFs. The advisor fee is 0.50%.

For New Yorker, there is the Eaton Vance Insured New York Municipal Bond Fund (ENX) yielding 5.4%, and was founded in 2001. It trades at a 7.2% discount to NAV. Leverage is 38.16%.

California residents may consider the Invesco Van Kampen California Value Municipal Income Fund (VCV), with a payout rate of 5.9%. It has a discount to NAV of 4.2%, with leverage of 35.57%. The company was founded in 1992.

Here are some issues to watch out for before investing in tax free CEFs:
* a highly leveraged portfolio
* high management/advisor fees
* trading at a premium to net asset value
* bonds which are subject to the Alternative Minimum Tax
* low quality bonds in the portfolio

But there is one other significant risk: an increase in interest rates, which will cause the bonds to drop in price and therefore causing the CEFs to fall also. Over the last several years, rates have remained low. Interest rates will rise eventually, but when rates rise is the big unknown.

A list of tax free income closed end funds, which includes yields, discounts and premiums, leverage, management fees, date founded, and other information, is available at WallStreetNewsNetwork.com.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

How to Get Tax Free Income in Your Portfolio

It's tax season again. Have you noticed a lot of dividends and interest showing up on your tax return? Wouldn't it be nice if you could convert that taxable income into non-taxable income? The one primary way of getting tax free interest is through municipal bonds.

One option is to owns the bonds directly and the other is by purchasing municipal bond closed end funds, sometimes referred to as tax-free CEFs or tax-free stocks. These closed end funds own muni bonds that pay interest that is exempt from Federal income taxes and may be exempt from state income taxes if issued in the state you live in or issued by one of the US territories, such as Puerto Rico, the Virgin Islands, or Guam. Municipal bonds are usually issued by states, counties, cities, and other governmental entities such as school districts, sewer districts, bridges, and water and power departments. WallStreetNewsNetwork.com has list of over 100 tax-free income CEFs, and more than 80 paying out yields more than than 5%.

There are many advantages besides the non-taxable income of these CEFs. Almost all of them pay dividends on a monthly basis, whereas, if you by an individual bond, the interest is paid semi-annually. CEFs have no minimum investment, whereas municipal bonds are sold in $5,000 denominations and many brokers have minimum purchase requirements of $15,000 to $25,000. You also have better liquidity with CEFs as prices are quoted real time and quotes are immediately available on the Internet, unlike individual bonds. In addition, CEFs provide diversification by owning many bonds in the portfolio.

One tax free CEF with a long term track record is the Dreyfus Strategic Municipal Bond Fund (DSM), which was founded in 1989. It currently yields 6.1%, and is selling for a 8.2% discount to Net Asset Value. The Net Asset Value, also known as the NAV, is the intrinsic value of the shares if the entire fund were liquidated and all the funds distributed among the shareholders. The fund does utilize some leveraging, currently 34%, which is somewhat lower than many other tax free CEFs. The advisor fee is 0.50%.

If you live in New York, you can consider the PIMCO New York Municipal Income Fund (PNF), founded in 2001. The fund yields 5.9%, and trades at a 3.9% discount to NAV. Leverage is 37.7%, and the advisor fee is 0.65%.

California residents may consider the Invesco Van Kampen California Value Municipal Income Fund (VCV), with a payout rate of 6%. It has a discount to NAV of 4%, with leverage of 35%. The company, founded in 1992, charges an advisor fee of 0.88%.

Here are some issues to watch out for before investing in tax free CEFs:
* a highly leveraged portfolio
* high management/advisor fees
* trading at a premium to net asset value
* bonds which are subject to the Alternative Minimum Tax
* low quality bonds in the portfolio

But there is one major risk, which is a rise in interest rates, which will cause the bonds to drop in price and therefore causing the CEFs to fall also. It is interesting to note that I have been mentioning that risk for several years, yet rates continue to remain low. Interest rates will go up eventually, it's just a matter of when.

A list of tax free income closed end funds, which includes yields, discounts and premiums, leverage, management fees, date founded, and other information, is available at WallStreetNewsNetwork.com.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

How to Get Tax Free Dividends

Now is the season for investors to prepare their taxes, or at least get their documents and receipts together for their accountant. Income investors may look at their 1099s for the dividends and interest they have received, thinking it would be great to not have to pay tax on that income.

There are a few ways to receive tax free income. First, many master limited partnerships, commonly known as MLPs, pay out dividends that are a return of capital, and are therefore non-taxable. However, these dividends are not really tax free as the tax has to be paid eventually when the investment is sold. MLPs are normally issued by oil and gas companies that are able to shelter the income using depreciation and amortization, which are non-out-of-pocket tax deductions.

However if you are looking for tax free income that is totally tax free, you should consider the municipal bond closed end funds, sometimes referred to as tax-free stocks or tax-free CEFs. These CEFs own municipal bonds that pay interest that is exempt from Federal income taxes and may be exempt from state income taxes if issued in the state you live in or issued by one of the US territories, such as Puerto Rico, the Virgin Islands, or Guam. Munis are generally issued by states, counties, cities, and other governmental entities such as school districts, sewer districts, bridges, and water and power departments. WallStreetNewsNetwork.com just recently updated its list of over 125 tax-free income CEFs, and more than 100 sporting yields greater than 5%.

There are many advantages besides the tax free income feature to these CEFs. Almost all of them pay dividends monthly, whereas, if you by an individual bond, the interest is paid semi-annually. CEFs have no minimum investment, whereas municipal bonds are sold in $5,000 denominations and many brokers have minimum purchase requirements of $15,000 to $25,000. You also have better liquidity with CEFs as prices are quoted real time and quotes are immediately available on the Internet. In addition, CEFs provide diversification through a group of bonds in the portfolio.

One of the funds that has been around for a while is the Dreyfus Strategic Municipal Bond Fund Inc. (DSM), which was founded in 1989. It currently yields 7.2%, and is selling for a 6.4% discount to Net Asset Value. The NAV is the intrinsic value of the shares if the entire fund were liquidated. The fund does use some leverage amounting to 32%, which is far lower than many other tax free CEFs. The management fee is a reasonable 0.50%.

For New Yorkers, there is the PIMCO New York Municipal Income Fund (PNF), founded in 2001. The fund yields 6.3%, and trades at NAV. Leverage is 39%, and the management fee is 0.65%. This CEF has the added bonus of seeking to be free of the Alternative Minimum Tax, also known as AMT, for New York residents.

California residents might want to consider the Invesco Van Kampen California Value Municipal Income Fund (VCV), yielding 6.7%. Discount to NAV is 7.6%, with 35% leverage. The company, founded in 1992, charges a management fee of 0.55%.

Here are some issues to watch out for before investing in tax free CEFs:
* high leverage
* high management fees
* trading at a premium to NAV
* bonds in the portfolio that may be subject to the Alternative Minimum Tax
* quality of bonds in the portfolio

The biggest risk of investing in these funds is a rise in interest rates, which will cause the bonds to fall in price and therefore the CEFs to drop in value.

For a list of tax free income closed end funds, which includes yields, discounts and premiums, leverage, management fees, date founded, and other information, go to WallStreetNewsNetwork.com.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

How to Receive Dividends that are Tax Free

It sure would be nice when tax time comes around to realize that much of the dividend income you are receiving is non-taxable. So what kind of tax free dividends are these? First, many master limited partnerships, commonly known as MLPs, pay out dividends that are a return of capital, and are therefore non-taxable. However, these dividends are not really tax free as the tax has to be paid eventually when the investment is sold. MLPs are normally issued by oil and gas companies that are able to shelter the income using depreciation and amortization, which are non-out-of-pocket tax deductions.

However if you are looking for tax free income that is totally tax free, you should consider the municipal bond closed end funds, sometimes referred to as tax-free stocks or tax-free CEFs. These CEFs own municipal bonds that pay interest that is exempt from Federal income taxes and may be exempt from state income taxes if issued in the state you live in or issued by one of the US territories, such as Puerto Rico, the Virgin Islands, or Guam. Munis are generally issued by states, counties, cities, and other governmental entities such as school districts, sewer districts, bridges, and water and power departments. WallStreetNewsNetwork.com just recently updated its list of over 125 tax-free income CEFs, and more than 100 sporting yields greater than 5%.

There are many advantages besides the tax free income feature to these CEFs. Almost all of them pay dividends monthly, whereas, if you by an individual bond, the interest is paid semi-annually. CEFs have no minimum investment, whereas municipal bonds are sold in $5,000 denominations and many brokers have minimum purchase requirements of $15,000 to $25,000. You also have better liquidity with CEFs as prices are quoted real time and quotes are immediately available on the Internet. In addition, CEFs provide diversification through a group of bonds in the portfolio.

One of the funds that has been around for a while is the Dreyfus Strategic Municipal Bond Fund Inc. (DSM), which was founded in 1989. It currently yields 7.5%, and is selling for a 6.4% discount to Net Asset Value (NAV=the intrinsic value of the shares if the entire fund were liquidated). The fund does use some leverage amounting to 34%, which is far lower than many other tax free CEFs. The management fee is a reasonable 0.50%.

For New Yorkers, there is the PIMCO New York Municipal Income Fund (PNF), founded in 2001. The fund yields 7.1%, and trades at a 6.3% discount to NAV. Leverage is 42%, and the management fee is 0.65%. This CEF has the added bonus of seeking to be free of the Alternative Minimum Tax, also known as AMT, for New York residents.

California residents might want to consider the Invesco Van Kampen California Value Municipal Income Fund (VCV), yielding 7.4%. Discount to NAV is 10.5%, with 35% leverage. The company, founded in 1992, charges a management fee of 0.55%. About 5.4% is subject to AMT.

Here are some issues to watch out for before investing in tax free CEFs:
* high leverage
* high management fees
* trading at a premium to NAV
* bonds in the portfolio that may be subject to the Alternative Minimum Tax
* quality of bonds in the portfolio

The biggest risk of investing in these funds is a rise in interest rates, which will cause the bonds to fall in price and therefore the CEFs to drop in value.

For a list of tax free income closed end funds, which includes yields, discounts and premiums, leverage, management fees, date founded, and other information, go to WallStreetNewsNetwork.com.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

How to Get Tax Free Dividends

It's a great feeling to receive a lot of dividends throughout the year, then on the following April 15, realizing that you don't have to pay tax on any of that income. There are many stocks, which are primarily closed end funds or CEFs, which pay dividends that are tax free. This tax free income is generated from municipal bonds in the portfolio. Although many of the Canadian oil income trusts pay income that may be partially or completely tax deferred due to depletion and depreciation deductions, the tax free stocks that invest in munis usually generate dividends that are completely exempt from Federal taxes.

Municipal bonds are issued by states, counties, cities, and other governmental agencies. Income from these 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 WallStreetNewsNetwork.com, with 42 of them yielding 7% or more. Just be cautious about investing in extremely high yield muni CEFs which may use leverage to attain their high yields.

One of the highest yielding tax free stocks is Federated Premier Municipal Income Fund (FMN) which yields 7.8%. They have been paying monthly dividends since 2003.

For you New Yorkers, there is the BlackRock New York Municipal Income Trust (BNY) which pays 6.7%. It invests in New York education, hospitals, housing, pollution control, tobacco, transportation, and water and sewer bonds. It has paid quarterly dividends since 2001.

If you live in California, you might want to consider the Van Kampen California Value Municipal Income Trust (VCV) which yields 7.6%. 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 6.8%. 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.

You can download a free Excel database spreadsheet list of over 200 tax free stocks at WSNN.com. Keep in mind that both yields and share prices fluctuate, and there is the possibility of bonds in the portfolios defaulting, as junk munis do exist, such as some 'dirt bonds' used to fund infrastructures of new housing developments (some of which never get built).

Author does not own any of the above.

By Stockerblog.com