Tax-Equivalent Yield Calculator
Calculate the taxable yield needed to match a tax-free municipal bond yield. Compare muni bonds to taxable corporate bonds and treasury bonds.
Tax-Equivalent Yield
✓ TAXABLE BOND WINS
Tax-equivalent yield of 3.5% muni bond
BREAKEVEN ANALYSIS BY BRACKET
Frequently Asked Questions
What is tax-equivalent yield?
Tax-equivalent yield = Muni yield ÷ (1 - Tax rate). A 4% muni bond for a 32% bracket investor has a TEY of 4% ÷ 0.68 = 5.88%. Any taxable bond paying under 5.88% is worse after tax.
When do muni bonds make sense?
Generally above the 22-24% federal tax bracket — especially in high-tax states. For low-bracket investors (0-12%), taxable bonds usually offer better after-tax returns.
Are all muni bonds tax-free?
Federal tax: yes for most. State tax: only exempt in the issuing state in most cases. AMT: some private-activity muni bonds trigger the Alternative Minimum Tax. Always verify before investing.
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For educational purposes only. Not financial advice. Consult a qualified advisor before making investment decisions.