I'm thinking about diving feet first into Munis, and I am a bit confused about the tax free rules. What I have read, is that the interest income is tax-free of federal income taxes and state income taxes (if you live in the state where the bonds are issued). This is where my confusion enters. I am a resident of Texas, stationed in California, so where does this rule apply? Must you be an actual "resident" of the state you are purchasing from or just reside in that state?

Also, do any of you have any thoughts on this type of investment?
I'm currently diversified and maxing out my IRA (not interested in TSP).
Thanks