Municipal bonds that are issued to pay for essential public projects are exempt from federal taxation.

True or False?

True

Explanation:

A municipal bond is also known as Muni. It is a debt security used for funding capital expenditure for a county. These bonds are free from federal taxes but can be taxed by local or state bodies under various circumstances. These bonds are popular among people from higher income tax brackets. These bonds are issued when people loan money to municipal boards in exchange of interest payment for a specific period.