Tax-Exempt Bond Tax Equivalent Calculator
Compare tax-free and taxable bond yields after tax.
Tax Treatment
Bond Type:Municipal
Federal:Tax-Free
State:Tax-Free
Tax-Equivalent Yield
Tax-Free Yield:3.50%
Tax Rate:0.0%
Equivalent:3.50%
Tax-free 3.50% = taxable 3.50% after tax adjustment
Bond Comparison
| Bond Type | Yield | Tax Rate | After-Tax | Equivalent |
|---|---|---|---|---|
| Tax-Free Municipal (Home State) | 3.50% | 0% | 3.50% | 3.50% |
| Tax-Free Municipal (Other State) | 3.50% | 5% | 3.32% | 3.68% |
| Treasury Bond | 3.50% | 24% | 2.66% | 4.61% |
| Taxable Bond | 5.00% | 29% | 3.55% | 5.00% |
Yield Comparison
Tax-Free:3.50%
Taxable After-Tax:3.55%
Difference:-0.05%
Income Analysis ($ 100000)
Tax-Free Income:$ 3500
Taxable Income:$ 5000
After-Tax:$ 3550
Tax Savings:$ 1450
Recommendation
Taxable bond better. After-tax yield 3.55% exceeds tax-free 3.50%. Higher nominal yield compensates for tax. Choose taxable.
Tax-Exempt Bond Key Points
- Municipal: federal tax-free
- Home state muni: state tax-free
- Out-of-state muni: state taxable
- Treasury: state tax-free
- Tax-equivalent yield formula
- Higher tax bracket = higher equivalent
- Consider credit quality
- AMT may apply (private activity)
- SS taxation affected by muni
- Compare risk levels