State and local tax treatment of municipal bonds, by state: Municipals Educational Series

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State and local tax treatment of municipal bonds, by state: Municipals Educational Series

Accessible version

Municipals Educational Series

State and local tax treatment of municipal

bonds, by state

The tax treatment of municipal securities 06 July 2026

This publication details the tax rates on interest income and describes the tax treatment Municipals

of municipal bonds in each of the 50 states, the District of Columbia, Puerto Rico, New United States

York City and Philadelphia. As few tax-advantaged strategies remain after 2017’s federal

tax reform under the Tax Cuts and Jobs Act (TCJA) and 2025’s One Big Beautiful Bill Act Table of Contents

(OBBBA), munis remain attractive investments, particularly for high earners in high tax

Tax treatment of municipal securities 2

states. Here, we help investors assess the relative attractiveness of munis from their

own state by calculating the extra after-tax yield on other bonds needed to match that Notable tax changes for 2026 tax year 3

muni. We compute this for Treasuries, out-of-state munis and fully taxable securities. Key terms & definitions for this report 3

Summary tables 3

Major state tax changes since our last report State-by-state tax tables 3

Exhibit 1: Notable individual income tax changes Appendices 3

ME introduces 2% "Millionaire Tax” and OH transitions to flat tax system

AR Top rate reduced to 3.70% from 3.90%

Yingchen Li

GA Flat rate reduced to 4.99% from 5.19% Municipal Research Strategist

IN Flat rate reduced to 2.95% from 3.00% BofAS

KY Flat rate reduced to 3.50% from 4.00% yingchen.li@bofa.com

ME Introduced a new 2% income tax surcharge for income over $1mn for single filers and $1.5mn for joint filers Ian Rogow

MS Top rate lowered to 4.00% from 4.40%, per schedule Municipal Research Strategist

BofAS