Supreme Court Rules Municipal Bonds Exempt From Tax

May 19, 2008 4:35 p.m. EST

Washington D.C. (AHN) - Municipal bonds are exempt from tax, the U.S. Supreme Court held on Monday. Voting 7-2, the justices allowed states to exempt from taxation interest on their own bonds.

Interests on bonds will thus be exempted from tax. Interest for bonds issued by other states will be charged against taxing residents, Forbes reported. Some of the states can continue to give special tax breaks on securities issued within their border, Bloomberg added.

The Municipal bond market amounts to $2.5 trillion.