Tax Equivalent Yield Calculator

Your details

The annual yield (coupon rate or current yield) of the tax-exempt bond, typically a municipal bond. Enter as a percentage, e.g. 4.5 for 4.5%.
%
Choose whether to enter your taxable income (auto-filled bracket) or type your marginal rate directly.
Your federal tax filing status for 2026.
Your estimated 2026 federal taxable income (after deductions). Used to look up your marginal bracket automatically.
USD
Most states exempt interest from their own municipal bonds from state income tax. Out-of-state munis are usually subject to your state income tax.
Your marginal state income tax rate, as a percentage. Used when the in-state bond is exempt from state tax, so the muni avoids both federal and state tax.
%
Enter a dollar amount to see the tax savings in dollar terms. Leave at 0 to skip the dollar comparison.
USD
Tax equivalent yieldModerate tax benefit
6.073%

The yield a taxable bond must offer to match this tax-free bond after taxes

Combined tax rate used25.9%
Federal bracket22%
Yield advantage over taxable equivalent1.573%
Estimated annual tax savings$40.74
After-tax yield on taxable bond (at TEY)4.5%
Tax-free bond30.4
Equivalent taxable bond7.646

Extra yield a taxable bond must offer: 1.573

  • After-tax yield
  • Combined tax rate

Tax equivalent yield: 6.073% (you are in the 22% federal bracket)

  • A taxable bond would need to yield 6.073% to match your 4.50% tax-free bond after a 25.9% combined marginal tax rate.
  • The tax exemption adds the equivalent of 1.573 percentage points of yield, at no extra credit risk.
  • On a $10,000 investment, that translates to roughly $40.74 in tax savings per year.
  • At a 25.9% combined rate, the tax shield is substantial. Municipal bonds are typically most valuable for investors in the 22% bracket and above.

Next stepCompare the 6.073% TEY to current yields on comparable-maturity Treasuries, investment-grade corporate bonds, and CDs to determine whether the muni offers a genuine advantage.

 = Powered by OnlyCalculators