Tax-Equivalent Yield

🇺🇸 US-specific

Compare tax-free municipal bonds against taxable corporate bonds.

Federal Tax (%)

State Tax (%)

Subject to 3.8% NIIT

US Net Investment Income Tax — applies above ~$200k (single) / $250k (married) MAGI.

Muni Bond (%)

Corporate Bond (%)

Verdict

The Municipal bond effectively yields 0.13% more after taxes.

Muni Tax-Equivalent Yield

5.63%

A taxable bond would need this yield to match the muni.

Corporate After-Tax Yield

3.90%

What you actually keep from the corporate bond.

Assumes muni interest is fully tax-exempt at both levels; some munis are state-taxable or subject to AMT.