DEFINITION of 'Taxable Bond'

A debt security whose return to the investor is subject to taxes at the local, state or federal level, or some combination thereof.

BREAKING DOWN 'Taxable Bond'

The majority of bonds issued are taxable bonds. Entities that have traditionally offered tax- free bonds have begun to issue taxable bonds to finance projects that do not benefit the public at large. For example, some universities are offering taxable bonds to finance building new facilities. These bonds, however, return the market rate as opposed to the lower return rate offered by tax-free bonds.

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