MBR Financial, Inc.
2000 West Loop South
Ste. 1510
Houston, TX 77027
832-667-8787
281-974-2108
contactus@mbrfinancial.com
 
 




Tax-Equivalent Bond Yields Calculator
Tax-Equivalent Bond Yields Calculator

Municipal bond interest is typically exempt from federal income tax and may also be free from state tax. Depending on your tax bracket, a tax-exempt municipal bond with a lower yield may offer a higher after-tax return than a higher yielding taxable bond.


If you enter the yield for a taxable bond, this calculator will calculate the yield that a tax-exempt bond would have to earn to be equivalent to the yield of the taxable bond. If you enter the yield for a tax-exempt bond, this calculator will calculate the yield that a taxable bond would have to earn to be equivalent to the yield of the tax-exempt bond.


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Select "Other" if you wish to enter a different tax rate below.

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Select "No" if the tax-exempt bond is subject to tax in your state (for example, if a municipal bond from another state is subject to tax in your state).



Taxable bond yields are subject to both the federal and state income tax rates entered above, and possibly the 3.8% Medicare contribution tax on net investment income (also referred to as the net investment income tax). Tax-exempt bond yields are tax-exempt for federal tax purposes (including the 3.8% Medicare contribution tax), but may be subject to state income tax (depending on the inputs selected above).

For taxable bonds, when factoring in the deduction of state income taxes on your federal income tax return, the deduction reduces both the federal income tax rate and the 3.8% Medicare contribution tax rate on net investment income. When factoring in the deduction of state income taxes for tax-exempt bonds that are subject to state income tax, the state income tax rate is effectively reduced by the federal income tax deduction (but not by the 3.8% Medicare contribution tax). Individuals who itemize deductions on IRS Form 1040 Schedule A are generally able to claim a deduction of up to $10,000 ($5,000 if married filing a separate return) for state and local property taxes and state and local income taxes (or sales taxes in lieu of income).



IMPORTANT DISCLOSURES Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018.