NEW YORK ( TheStreet) -- As Washington struggled to sidestep the fiscal cliff last year, municipal funds sank. During December, the average intermediate tax-free fund lost 1.2%, according to Morningstar. Investors worried that Congress would undo some of the advantages of municipals. But since tax legislation passed on Jan. 1, the funds have gained back much lost ground.The markets cheered the legislation because it did nothing to change the tax-exempt status of municipals. In addition, Congress raised the top tax bracket from 35.0% to 39.6%. That may be painful for high income earners, but it makes the tax exemption of municipal bonds more valuable.
Tax-Free Bonds Offer Tempting Yields
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