Tax-Equivalent Yield Calculator
Muni Yield to Taxable Equivalent
Find the taxable yield equivalent of a tax-free municipal bond
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Taxable Yield to Muni Equivalent
Find the muni bond yield needed to match a taxable bond after taxes
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Formula
Tax-Equivalent Yield = Municipal Bond Yield / (1 - Combined Marginal Tax Rate)
Frequently Asked Questions
What is tax-equivalent yield?
Tax-equivalent yield is the pre-tax yield a taxable bond must offer to match the after-tax return of a tax-free municipal bond. Formula: TEY = Muni Yield / (1 - Tax Rate). A 3.5% muni in the 32% bracket equals a 5.15% taxable bond.
When are municipal bonds better than taxable bonds?
Muni bonds become more attractive as your tax bracket increases. In the 37% bracket, a 3.5% muni equals a 5.56% taxable yield. In the 12% bracket, the same muni only equals 3.98%. Compare the tax-equivalent yield to available taxable bond yields.
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