Taxable-Equivalent Yield

Interest income earned on corporate bonds is subject to federal, state, and local taxes. However, interest earned on U.S. Treasury bonds is exempt from state and local taxes, while interest from municipal bonds is typically exempt from federal tax (and when purchased by residents of the issuing state, also exempt from state and local taxes). In order to compare the yield between a tax-free and a taxable bond, you need to know the taxable equivalent yield of the tax-free bond.

To make an after-tax comparison of bonds with different tax treatments, use this calculator to determine their taxable-equivalent yield. Answer the questions below and click Submit.

What is your federal income tax rate?

If your income is subject to state taxes, enter your state income tax rate.


Is interest income from municipal bonds issued in your state exempt from state and local taxes?

A portion of the income from municipal bonds may be subject to the federal and/or state alternative minimum tax for certain investors.
Calculators are provided for educational purposes and are designed to get you thinking about your financial goals. Returns shown are for illustrative purposes only and are not representative of the performance of any Columbia Management product. Actual rates of return cannot be predicted and will fluctuate. Investing involves risk, including possible loss of principal. Using planning tools should be part of a regular financial check-up rather than a one time exercise. Default values in this calculator are placeholders. They should not be viewed as recommendations. Change the numbers to suit your personal situation and expectations. The sample allocations provided by some of the calculators are designed to help you think about retirement planning and should not be viewed as recommendations. You may want to consider many individual factors, including your goals, time frame, and risk tolerance, to develop a plan that is appropriate for you.

Investments in mutual funds involve risk. Some funds have more risk than others. There are additional risks associated with investing in non-US companies, high-yield bonds, emerging markets, aggressive growth stocks, specialty funds and small-, mid- and micro-cap stocks which are more fully explained in the prospectuses. In addition, there is no guarantee that a fund's investment objective will be met.

This calculator is not intended to provide tax or legal advice and should not be relied upon as such. Any specific tax or legal questions concerning the matters described in this calculator should be discussed with your tax or legal advisor.