Tax-Equivalent Yield Calculator

How to Use This Calculator

1. Enter your tax-exempt yield and marginal tax rate to see the tax-equivalent yield instantly.
2. Use Federal + State to include state income taxes in the calculation for an accurate combined rate.
3. Use Compare to see whether a specific muni or taxable bond is better for your situation.
4. The Professional tier adds NIIT, AMT adjustment, qualified dividend comparison, and a recommendation based on your full tax picture.

Formula

Example

Frequently Asked Questions

• What is tax-equivalent yield? ▼
  Tax-Equivalent Yield (TEY) = Tax-Exempt Yield ÷ (1 − Marginal Tax Rate). It converts a tax-exempt bond yield into the equivalent taxable yield. If a muni yields 3.5% and your tax rate is 24%, the TEY = 3.5% ÷ 0.76 = 4.61%. You'd need a taxable bond yielding more than 4.61% to beat the muni.
• Who benefits most from municipal bonds? ▼
  High-income investors in the 32%–37% federal bracket benefit most. At lower tax brackets (22% or below), the TEY advantage may be minimal. Calculate your combined federal + state rate — state taxes can add 5–10% to your marginal rate.
• What is the Net Investment Income Tax (NIIT)? ▼
  NIIT is an additional 3.8% tax on investment income for individuals with MAGI above $200,000 (single) or $250,000 (married). Municipal bond interest is exempt from NIIT, which makes it even more valuable for high earners.
• When can AMT apply to municipal bonds? ▼
  Most municipal bonds are exempt from federal income tax. However, "private activity bonds" — issued for projects like airports, housing, or student loans — may be subject to the Alternative Minimum Tax (AMT). The Professional tier flags this adjustment.
• What is the break-even tax rate for muni bonds? ▼
  Break-Even Tax Rate = 1 − (Muni Yield ÷ Taxable Yield). If a muni yields 3.5% and a corporate bond yields 5.0%, the break-even rate = 1 − 3.5/5.0 = 30%. If your tax rate exceeds 30%, the muni wins; below 30%, take the taxable bond.

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