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.