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Municipal Bond Tax Equivalent Yield

This calculator will estimate the tax-equivalent yield (TEY) for a municipal bond. Income generated from municipal bond coupon payments are not subject to federal income tax. In addition, if the bond was issued in your state of residence, you can also avoid state income taxes. Use this calculator to determine the yield required by a fully taxable bond to earn the same after-tax income as a municipal bond.

While this calculator can provide you with some insight, it was developed to be very general and may not fit everyone’s personal situation. Please feel free to contact our office after using this calculator so that we can perform a more thorough analysis.

 

Definitions

Bond yieldThis is the annual yield of your municipal bond or bond fund.Estimated taxable incomeThis is your total income, after exemptions, adjustments, and deductions. We use this, along with your filing status, to determine your marginal income tax rate. You can use last year’s tax return as a guide to what your taxable income will be for the current year. Your taxable income can be found on your income tax form 1040 or 1040A. Make sure to increase or decrease the amount to compensate for any changes to your current year’s income.Federal tax filing statusThis is used, along with your taxable income, to determine your federal marginal income tax rate. The table below lists the federal income tax rates by income and filing status. We use this table to determine your marginal federal income tax rate.

Filing Status and Income Tax Rates 2012

Tax rate Married filing jointly

or qualified widow(er)

Single Head of household Married filing separately
10% $0 – 17,400 $0 – 8,700 $0 – $12,400 $0 – 8,700
15% $17,400 – 70,700 $8,700 – 35,350 $12,400 – 47,350 $8,700 – 35,350
25% $70,700 – 142,700 $35,350 – 85,650 $47,350 – 122,300 $35,350 – 71,350
28% $142,700 – 217,450 $85,650 – 178,650 $122,300 – 198,050 $71,350 – 108,725
33% $217,450 – 388,350 $178,650 – 388,350 $198,050 – 388,350 $108,725 – 194,175
35% over $388,350 over $388,350 over $388,350 over $194,175

 

Source: Revenue Procedure 2011-52 http://www.irs.gov

State income tax rateYour marginal state income tax rate, if any.


Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

Calculators are provided by an independent third party and are being made available to you as self-help tools for your independent use and are not intended to provide investment advice or be representative of actual results. We do not guarantee their applicability or accuracy in regards to your individual circumstances. The determinations made by these calculators should not be construed as guarantees or projections. Moreover, the reasonableness of certain information may change over time because of changes in tax law, investment trends and your personal circumstances. The information contained here is based on current law and has been obtained from sources believed to be reliable, but we do not guarantee its accuracy. Investment results can vary considerably depending on the type of securities involved, general market conditions and other factors. It is important that you periodically review and update your plans. Raymond James does not provide tax or legal advice. You should contact your tax or legal advisor concerning your particular situation. All investments carry a degree of risk, and past performance is not a guarantee of future results.

 

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