Tax-Equivalent Yield Calculator
Compare tax-free municipal bond yields with taxable bond yields. Enter the municipal bond yield and your marginal tax rate to find the equivalent taxable yield you would need to earn the same after-tax return.
Tax-Equivalent Yield Calculator
FAQ
What is tax-equivalent yield?
Tax-equivalent yield is the yield a taxable bond would need to offer to match the after-tax return of a tax-free municipal bond. It accounts for the tax advantage of municipal bonds, which are typically exempt from federal income tax.
Who benefits most from municipal bonds?
Investors in higher tax brackets benefit most from municipal bonds because the tax savings are greater. For example, a 3% municipal bond is equivalent to a 3.95% taxable bond for someone in the 24% bracket, but equivalent to 4.62% for someone in the 35% bracket.
Are municipal bonds always tax-free?
Municipal bond interest is generally exempt from federal income tax, and may also be exempt from state and local taxes if you live in the issuing state. However, some muni bonds (private activity bonds) may be subject to the Alternative Minimum Tax (AMT).