Tax Equivalent Yield Formula
The tax-equivalent yield formula, with a live calculator.
Your numbers never leave your browser — all tax math runs locally, no account, no trackingTry: Tax-exempt yield=3.5, Federal bracket=24, State bracket=5, NIIT=3.8, Investment=10000 → 3.50%, 32.80%, 5.21%, $350, 5.21%
How to use
The taxable equivalent yield tells you what a taxable bond must pay to match a tax-free municipal yield after tax.
Formula
TEY = tax-exempt yield ÷ (1 − combined marginal rate)
FAQ
Why divide by (1 − rate)?
Because a taxable bond keeps only (1 − rate) of each interest dollar.
Is the formula exact?
It is exact for ordinary income tax; it ignores state-specific muni exemptions and AMT edges.
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