Find the taxable yield you'd need to match a tax-free bond's return, based on your marginal tax rate.
Municipal bonds are often exempt from federal (and sometimes state) income tax, so their stated yield understates their real value compared to a taxable bond. Tax-equivalent yield converts a tax-free rate into the taxable rate you'd need to match it after taxes.
Tax-Equivalent Yield = Tax-Free Yield ÷ (1 - Marginal Tax Rate)
A 3.5% tax-free yield for someone in the 24% tax bracket is equivalent to a 4.605% taxable yield.
This tool is for general comparison only and isn't investment advice.
It converts a tax-exempt yield into the equivalent taxable yield needed to match it.
Tax-exempt yield ÷ (1 − marginal tax rate).
It lets investors compare tax-exempt and taxable investments on an equal, after-tax basis.