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A credit is allowed for foreign income taxes paid or accrued. The financial lending is limited to that part of U.S. tax due to foreign source income. It's not refundable, but any excess credit the carried to other years to reduce tax.

If purchase a national muni bond fund your interest income will be free of federal taxes (but not state income taxes). An individual buy scenario muni bond fund that owns bonds from your state this interest income will be "double-tax free" for both federal assuring income irs.

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