Tax-free income from municipal bonds is included in your modified adjusted gross income. You may own a large municipal bond portfolio of all high coupon munis: maybe 5.50%, 5.00%, perhaps some 4.00% coupons. By definition this overstates your income, thus possibly placing you in a higher Medicare means testing category than is appropriate. The bummer here is that if your muni portfolio is large enough and populated with high coupon bonds, the gross income grotesquely overstates what you are actually earning. That is, several municipal bond fund managers may be queried as to what structure they may be interested in having.

Source: Forbes November 28, 2017 20:26 UTC