Tax Equivalent Yield Calculator
See what a taxable bond has to pay to match a municipal bond or a Treasury, using 2026 federal brackets and your state rate.
Updated 2026-10-27
Your result
A 4.00% municipal bond has a tax-equivalent yield of 5.13% at a 22% federal rate. A fully taxable bond has to pay that to leave you the same money after tax.
Formula: yield / (1 - federal rate - state rate).
Your numbers
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How it is calculated
The tax-equivalent yield is the yield a fully taxable bond must pay to leave the same money after tax. The federal rate is the marginal 2026 bracket for your taxable income. State tax is added to the federal rate, which assumes you take the standard deduction and do not deduct state tax. That assumption is ours, not a rule from an official source.
- Municipal bond, exempt from federal and state tax (in-state): yield / (1 - federal rate - state rate)
- Municipal bond, exempt from federal tax only: yield x (1 - state rate) / (1 - federal rate - state rate)
- Treasury, exempt from state tax only: yield x (1 - federal rate) / (1 - federal rate - state rate)
Brackets cover single and married filing jointly. Head of household and married filing separately are left out because we could not confirm their 2026 thresholds; pick your bracket by hand instead.
Sources
- MSRB, Understanding Taxable Municipal Bonds (taxable equivalent yield = tax-exempt yield / (1 - tax bracket)), read 2026-10-27. Quote: "What is the Taxable Equivalent Yield of My Tax-Exempt Municipal Bond?".
- TreasuryDirect, Treasury Notes (state and local tax treatment), read 2026-10-27. Quote: "No state or local taxes".
- IRS, IR-2025-103: tax inflation adjustments for tax year 2026 (Rev. Proc. 2025-32), read 2026-10-27. Quote: "For tax year 2026, the top tax rate remains 37% for individual single taxpayers with incomes greater than $640,600".
- Hartford Funds, What Every Muni Investor Should Know About Tax-Equivalent Yields (formula: yield / (1 - tax rate)), read 2026-10-27.
Questions about tax-equivalent yield
How do you calculate tax-equivalent yield?
Divide the tax-exempt yield by one minus your tax rate. A 4.50% municipal bond for someone in the 22% federal bracket with no state tax gives 4.50 / (1 - 0.22) = 5.77%. A taxable bond has to pay that much to leave the same money after tax.
Which tax rate should I use?
Your marginal rate, the rate on your last dollar of taxable income, not your average rate. The calculator picks the 2026 federal bracket from your taxable income and filing status. Add your state rate if the bond is exempt from state tax too.
How does state tax change the result?
The calculator adds the state rate to the federal rate, assuming you do not deduct state tax on your federal return. At 4.00% in the 24% federal bracket and a 5% state rate, an in-state muni has a tax-equivalent yield of 5.63%.
How is a Treasury compared?
Treasury interest is taxed federally but is exempt from state and local income tax by federal law. Against a fully taxable bond taxed at both levels, a 4.00% Treasury at 24% federal and 5% state works out to 4.28%.
Does it work for a bond fund?
As a rough guide, if you enter the fund yield. Funds can hold bonds that are taxable or subject to the alternative minimum tax, which this page does not model.
Next: see what a yield compounds to in the compound interest calculator or the dividend reinvestment calculator.
This is an educational tool, not tax or investment advice. It ignores the alternative minimum tax, the net investment income tax, bond premiums and your full tax situation. Check a bond's tax treatment with a tax professional.