What's the interest rate on this account? <a href="http://skipetriny.cz/holcombpharmacycom-0a52.pdf">grmedex.com</a>  Interest on municipal bonds carries no federal income tax liability, making them useful for investors in high-tax brackets. If they live in states with high tax rates, such as New York and California, so much the better, because states do not tax interest on municipal bonds issued within their borders - or in Puerto Rico and other U.S. territories like the Virgin Islands and Guam.