AMT Bonds

Bonds which pay interest that is subject to the alternative minimum tax (AMT). These are ‘private activity bonds’, meaning that more than a minimum percentage of the bond proceeds benefit a non-public entity. (For instance, certain airport revenue bonds, which benefit an airline.) Under present law, AMT bonds are included in the income tax calculation only if the taxpayer is subject to the AMT. Owning AMT bonds will not make a taxpayer subject to the AMT. Because of the potential tax implications, AMT bonds trade at yields higher than non-AMT bonds. Consult with your CPA or other tax advisor regarding the application of AMT rules to your circumstances. See also Alternative Minimum Tax, Private Activity Bonds.