Which type of bond typically does not offer tax advantages?

Corporate bonds typically do not offer tax advantages because the interest income earned from these bonds is subject to federal, state, and local taxation. Investors who purchase corporate bonds receive interest payments that are fully taxable, meaning they need to pay taxes on that income in the year it is received. This lack of tax benefits can make corporate bonds less attractive to certain investors compared to other types of bonds that may offer tax incentives.

In contrast, municipal bonds are issued by states and local governments and often come with tax-free interest, particularly for investors in higher tax brackets. TIPS (Treasury Inflation-Protected Securities) provide tax advantages when considering inflation adjustments, and zero-coupon bonds are subject to different tax treatments regarding the recognition of interest income. Understanding these distinctions is crucial in evaluating different bonds and their respective tax implications when making investment decisions.