Are municipal bonds always better for high earners?

Generally yes, but not always. TEY shows when they're better. A 3% muni for a 37% bracket investor equals a 4.76% taxable yield — typically hard to beat with investment-grade bonds.

Should I include state taxes?

For full accuracy, add your state tax rate to your federal rate (if the muni is exempt from both). Example: 24% federal + 5% state = 29% combined rate for the calculation.

Tax-Equivalent Yield Calculator

The Tax-Equivalent Yield Calculator helps you compare a tax-free investment (like a municipal bond) to a taxable one on an equal footing. A 3% municipal bond yield may actually be worth more than a 4% corporate bond yield if you're in a high tax bracket. Enter the tax-free yield and your marginal tax rate to find the equivalent taxable yield needed to match it.

Tax-Free Yield (%)

Your Marginal Tax Rate (%)

Frequently Asked Questions

TEY is the pre-tax yield a taxable bond must offer to match the after-tax return of a tax-exempt bond. Formula: TEY = Tax-Free Yield / (1 − Tax Rate).

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