Read our lips: no taxes. (tax advantages of state bonds) (includes list of tax-free bonds by...

State bonds may only yield between 5.5% and 6%, but their non-taxable federal and state terms can increase the overall yield to as much as 10%. Tips on selecting bonds and determining equivalent yields are provided.

It's tough to get excited about an investment that yields 5.5% to 6%. But protect it from federal income tax and that yield is as good as 7.6% to 8.7% of taxable income. Add a shield from state and local taxes and it equates to just short of 10%.

You perform this alchemy by investing in your state's municipal bonds, normally through bond funds and uni