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When bonds are subject to AMT
Q
You say that a bond subject to AMT should be clearly noted in the description of the bond. I do see that some bonds say “Subject to AMT” in the description and some say “non-taxable.” Is there any other type of “tax status”? Does non-taxable mean tax exempt from federal and state taxes (assuming the bond is issued in my home state)? Can you elaborate a little on AMT status? We want to invest some more money in tax-exempt bonds and have begun researching the best way to do that. While we certainly don’t need another company to deal with, we are considering consolidating some of these accounts. How are you different from these other companies?
A
James A. Klotz responds:
The AMT status of a bond is required to be disclosed on the confirmation of purchase. A reputable broker/dealer will also be glad to document the tax status of your bond purchase as it relates to federal and state taxes.
On our Web site “non taxable” means free from federal and state taxes for residents of most issuing states. Bonds labeled “non-taxable” would not be subject to the AMT.
AMT is a required disclosure item and is an integral part of the description of a tax-free bond. This information can be documented through FINRA recognized information services such as Bloomberg or J.J. Kenny.
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