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Home > Calculators > Municipal Bond Tax Equivalent

Municipal Bond Tax Equivalent Yield

This calculator will estimate the tax-equivalent yield (TEY) for a municipal bond. Income generated from municipal bond coupon payments are not subject to federal income tax. In addition, if the bond was issued in your state of residence, you can also avoid state income taxes. Use this calculator to determine the yield required by a fully taxable bond to earn the same after tax income as a municipal bond.

Municipal Bond Tax Equivalent Yield

A BOND_YIELD municipal bond yield has a STATE_MUNICIPAL_YIELD tax equivalent yield.

**GRAPH**

This yield assumes that the interest earned is not subject to federal or state income taxes. If this bond or bond fund is subject to state income taxes, the tax equivalent yield is FEDERAL_MUNICIPAL_YIELD. The federal income tax rate used in this calculation was FED_INCOME_TAX_RATE and you entered your state income tax rate as STATE_INCOME_TAX_RATE.

Results Summary
Federal tax filing status FEDERAL_TAX_FILING_STATUS
Estimated taxable income ESTIMATED_TAXABLE_INCOME
Federal income tax rate FED_INCOME_TAX_RATE
State income tax rate STATE_INCOME_TAX_RATE
Total effective income tax rate TOTAL_TAX_RATE
Bond yield BOND_YIELD
Tax Equivalent Yield (TEY)
Exempt from federal income tax 		FEDERAL_MUNICIPAL_YIELD
Tax Equivalent Yield (TEY)
Exempt from federal and state income taxes 		STATE_MUNICIPAL_YIELD

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.



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Definitions

Bond yield
This is the annual yield of your municipal bond or bond fund.

Estimated taxable income
This is your total income, after exemptions, adjustments, and deductions. We use this, along with your filing status, to determine your marginal income tax rate. You can use last year's tax return as a guide to what your taxable income will be for the current year. Your taxable income can be found on your income tax form 1040 or 1040A. Make sure to increase or decrease the amount to compensate for any changes to your current year's income.

Federal tax filing status
This is used, along with your taxable income, to determine your federal marginal income tax rate. The table below lists the federal income tax rates by income and filing status. We use this table to determine your marginal federal income tax rate.

Filing Status and Income Tax Rates 2011

Caution: Do not use these tax rate schedules to figure 2010 taxes. Use only to figure 2011 estimates.

Tax rateMarried filing jointly
or qualified widow(er)		SingleHead of householdMarried filing separately
10% $0 - 17,000 $0 - 8,500 $0 - $12,150 $0 - 8,500
15% $17,000 - 69,000 $8,500 - 34,500 $12,150 - 46,250 $8,500 - 34,500
25% $69,000 - 139,350 $34,500 - 83,600 $46,250 - 119,400 $34,500 - 69,675
28% $139,350 - 212,300 $83,600 - 174,400 $119,400 - 193,350 $69,675 - 106,150
33% $212,300 - 379,150 $174,400 - 379,150 $193,350 - 379,150 $106,150 - 189,575
35% over $379,150 over $379,150 over $379,150 over $189,575
Source: http://www.irs.gov

State income tax rate
Your marginal state income tax rate, if any.

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We can not and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

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