A Limited Tax Bond is a type of municipal bond issued by a local government entity, such as a city or county, to fund specific projects or initiatives. Unlike general obligation bonds, which are backed by the full faith and credit of the issuer, limited tax bonds are supported by a limited source of revenue, often derived from a specific tax or revenue stream.

The term "limited tax" refers to the fact that the issuer has imposed a limit on the amount of taxes it can levy to repay the bondholders. This means that the bondholders' repayment is contingent upon the availability of the designated revenue source. If the revenue generated from the specific tax or revenue stream is insufficient to cover the bond payments, the issuer may not have the authority to increase taxes or find alternative revenue sources to fulfill the obligation.

Investors considering limited tax bonds should carefully evaluate the specific revenue source backing the bonds and assess its stability and adequacy to ensure the issuer's ability to meet its repayment obligations. Understanding the limitations and risks associated with limited tax bonds is crucial for investors seeking to make informed decisions in the municipal bond market.