Municipal Bond Tax Equivalent Yield

Convert municipal bond yields into taxable-equivalent yields for comparison.

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Bond & Tax Details

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Tax-Equivalent Analysis

Tax-Equivalent Yield4.9%
Tax Savings (Yield Difference)1.4%
Effective Tax Rate29.0%
Break-Even Taxable Yield4.9%

A taxable bond would need to yield 4.93% to match this municipal bond's after-tax return.

How it works›

Model and assumptions. Taxable equivalent = municipal yield after applicable state tax divided by one minus combined federal and state rates. In-state bonds are assumed exempt from both entered taxes; out-of-state bonds incur state tax. State taxes are assumed not deductible federally. Tax-equivalent yield equals the tax-free yield divided by one minus the entered marginal tax rate. The comparison assumes the entered tax treatment applies; credit quality, maturity, call features and state-specific exemptions still differ.IRS Publication 550