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Tax exempt bonds

This article describes how to enter tax exempt bonds in your Plan.

Nancy Gates avatar
Written by Nancy Gates
Updated over a week ago

To model tax free bond interest we recommend that you add an after tax account with Ordinary Income tax treatment and rely upon the Rate of Return to model annual interest. This will make your plan more conservative, as the interest will be subject to federal income and possibly state income tax, but is the simplest method.


If you want more granularity and to account for federal tax free interest income, we generally recommend one of the following methods.

METHOD 1

STEP 1: Head over to MyPlan > Accounts and Assets

STEP 2: βž• Add the account as a Checking/Savings/Investment account

STEP 3: Give the account a descriptive name, "Treasuries" for example

STEP 4: Select Ordinary Income as your tax treatment

STEP 5: Enter your Account Balance

STEP 7: Set your rates of return to zero

STEP 8: Add a monthly pension for the interest income

For bonds that are tax free at the state level, add annual interest as a pension and select "Federal Only" for taxes. For bonds that are tax free at the federal level add annual interest as a pension and select "No" for taxes.

METHOD 2

When you use this method the Planner will increase the account balance based upon your rates of return, but neither the interest/dividends or withdrawals will be taxed on any level.

STEP 1: Head over to MyPlan > Accounts and Assets

STEP 2: βž• Add the account as a Checking/Savings/Investment account

STEP 3: Give the account a descriptive name, "Muni Bond Fund" for example

STEP 4: Select Capital Gains as your tax treatment

STEP 5: Enter your Account Balance

STEP 6: Enter a Cost Basis that is higher than your Account Balance

STEP 7: Set your rates of return

STEP 8: Exclude the account from your withdrawal strategy


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