How will the tax reform plan impact municipal investing?

I have some municipal funds in my portfolio. The yields are low but are exempt from Federal taxes. How will the new tax reform plan impact municipal investing?

Investing, Taxes
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January 2018
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First off, municipal bonds will still be attractive to individual investors because although taxes have been cut, they are still relatively high, making muni's tax exempt nature valuable. The limitation on deducting state and local taxes would make munis that are exempt from state and local taxes very attractive to investors. At the margins changes to AMT (higher exemption and phase out) will make munis subject to AMT attractive and private activity bonds will continue to find buyers. Some other elements of the bill such as mortgage deduction limitation could have a tangential effect on the muni market.

Corporations (Especially banks and insurance companies) may not find muni's as attractive at a 21% tax rate as they did at the 35% tax rate, however it may take months or years for this to play out and companies will continue to find munis to be a good diversification to their bond portfolios. 

The bottom line is that munis will continue to be attractive and if you are investing through a fund run by a  talented manager then he/she should be able to add value to your portfolio.

January 2018
January 2018