The U.S. federal government releases its own bonds from the treasury and from a number of government firms. Those developing in less than one year are known as T-bills. Bonds that grow in one to 10 years are T-notes, and those that take more than 10 years to grow are treasury bonds. In many cases, you don't have to pay state or local earnings taxes on the interest they earn.

Munis financing things like healthcare facilities, schools, power plants, streets, workplace structures, airports, bridges and the like. Towns usually provide bonds when they need more cash than they gather through taxes. The great thing about local bonds is that you do not have to pay federal earnings taxes on the interest they make.

While business bonds are a greater risk than government bonds, they can make a lot more money. There's also a much larger choice of business bonds. The disadvantage is that you do need to pay federal income tax on the interest

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