Tax-Equivalent Yield Calculator (Muni Bonds)

Your estimate

The rates are estimated from 2026 federal and state income-tax brackets. Your actual tax situation may differ.

Municipal bond yield

Enter the bond’s annual yield, as a percentage.

State of residence

Federal filing status

Estimated taxable income

Use an estimate after deductions, not gross income. This same amount is used as a rough proxy for both federal and state taxable income.

Where is the bond issued?

In my state

Outside my state

State tax treatment of municipal interest depends on the issuer and state rules.

Estimated taxable-equivalent yield

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Enter your state, filing status, income, and bond location to see an estimate.

Estimated marginal rates

Federal—

State—

At a glance

Municipal bond yield—

Taxable-equivalent yield—

Estimated yield advantage—

Enter your state and income to see the estimated marginal rates used.

Understanding the result

How this estimate works

The estimator looks up the federal and state marginal tax brackets that correspond to the taxable income you enter. It then compares the municipal yield with the taxable yield needed to provide a similar after-tax return.

In-state municipal bond: yield ÷ ((1 − federal rate) × (1 − state rate)) Out-of-state municipal bond: yield ÷ (1 − federal rate), assuming the muni interest is taxed by your state.

Federal brackets are for tax year 2026. State brackets are the latest schedules compiled by the Tax Foundation as of January 1, 2026; certain inflation-indexed state thresholds may reflect 2025 amounts where 2026 amounts were not yet available. The state source provides single and married-filing-jointly schedules only, so the single schedule is used for head-of-household and married-filing-separately estimates. No local income taxes are included.

The single income estimate is applied to both federal and state schedules, even though state taxable income can differ. This estimate does not account for deductions, credits, federal deductibility of state taxes, tax recapture, local taxes, the alternative minimum tax, the 3.8% net investment income tax, or every state-specific exception. Washington's capital-gains tax is not applied to bond interest.

For a more complete comparison, consider credit quality, call features, maturity, liquidity, fees, and the tax treatment of your specific holdings. Explore our tax planning approach.

Bracket sources: IRS Revenue Procedure 2025-32 and the Tax Foundation’s 2026 state income tax tables.

A Pennsylvania example

A Pennsylvania investor in the top federal bracket buys a Pennsylvania municipal bond yielding 3.50%. Its interest is exempt from the 37% federal rate, the 3.8% Net Investment Income Tax, and Pennsylvania’s 3.07% income tax, a combined 43.87%.

Municipal yield

3.50%

Combined marginal rate (37% + 3.8% + 3.07%)

43.87%

Tax-equivalent yield (3.50% ÷ 0.5613)

6.24%

A taxable bond of similar quality would need to yield about 6.24% to leave this investor with the same income after tax. The calculator above estimates your own marginal rates from your income, filing status, and state. Hypothetical example for illustration only.

Things the simple formula leaves out

State treatment. Out-of-state municipal bonds are usually taxable in your home state, which lowers their advantage.

Credit and call risk. Compare bonds of similar quality and maturity, and check call provisions.

Account type. Municipal bonds belong in taxable accounts; their exemption adds nothing inside an IRA. Our guide to asset location explains why.

For more on building a bond portfolio, see our bond investing guide.

Frequently asked questions

How do you calculate tax-equivalent yield?

Divide the tax-free yield by one minus your marginal tax rate: tax-equivalent yield = municipal yield / (1 - tax rate). For an in-state bond that is exempt from both federal and state tax, use your combined marginal rate, including the 3.8% Net Investment Income Tax if it applies to you. For example, a 3.5% Pennsylvania municipal bond for an investor with a combined 43.87% rate has a tax-equivalent yield of about 6.24%.

Are municipal bonds exempt from Pennsylvania income tax?

Interest on bonds issued by Pennsylvania and its municipalities is generally exempt from Pennsylvania personal income tax, while interest on out-of-state municipal bonds is generally taxable in Pennsylvania at 3.07%. Most municipal bond interest is exempt from federal income tax and the Net Investment Income Tax, although some private-activity bonds can be subject to the alternative minimum tax.

When are municipal bonds better than taxable bonds?

Municipal bonds tend to be most attractive for investors in higher tax brackets holding bonds in taxable accounts. Compare the tax-equivalent yield with the yield on a taxable bond of similar credit quality and maturity. In IRAs and other tax-deferred accounts, the tax exemption is wasted, so taxable bonds are usually the better fit there.

Tax-Equivalent Yield Estimator