Work out municipal bond tax equivalent yield instantly with clear inputs, formula shown and shareable results.
A tax-free yield must be grossed up by dividing by one minus your marginal rate to be comparable with taxable bonds. The higher your tax bracket, the more valuable the exemption — which is why municipal bonds appeal mainly to top-rate investors.
Tax-equivalent yield
TEY = tax-free yield / (1 - marginal tax rate)
Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.
Because you need the pre-tax yield that leaves the tax-free yield after tax, which is a division.
Yes. Municipal issuers can and do default, so the exemption is not a substitute for credit analysis.