Tax-equivalent yield calculator
Taxable Equivalent Yield Calculator
Tax-equivalent yield is the taxable yield that leaves you the same income after tax as a tax-free yield. To find it, divide the tax-free yield by 1 minus your tax rate. This free taxable equivalent yield calculator does that math for municipal bonds, Treasury bills and Treasury funds against CDs, savings and corporate bonds, at the federal and state rates you enter.
Free to use. No account or sign-up needed.
Your numbers
The yearly yield of the bond, fund, CD or account. Compare yields of the same kind.
A municipal bond or fund from your own state: no federal or state income tax.
Your top federal bracket. For 2026: 10%, 12%, 22%, 24%, 32%, 35% or 37% (table below).
Your top state rate plus any city income tax. Use 0% if your state has no income tax.
Choose Yes to assume this income faces the full 3.8% marginal NIIT rate. This does not determine your NIIT liability. Muni interest is exempt.
Choose Yes only when the full state and local tax on this income is deductible on your federal return. This is a simplified assumption, not an eligibility check.
Shows the yearly income after tax.
A CD, savings or corporate bond yield you could get instead.
Results
At a 24% federal and 5% state rate, a 3.5% muni from your state pays the same after tax as a 4.93% fully taxable yield. A 4% taxable yield keeps 2.84% after tax: $2,840 a year on $100,000, against $3,500 from your yield.
Yield needed to match, by type
Each yield leaves $3,500 a year after tax on $100,000.
Tax-equivalent yield by federal bracket
Each row recalculates your selected yield at that federal rate. The No state tax column also sets the state rate to 0%.
What is tax-equivalent yield?
Tax-equivalent yield, also called taxable equivalent yield or TEY, is the yield a fully taxable investment would need to pay to leave you the same income after tax as a tax-free or partly tax-free yield. It turns two yields that are taxed differently into numbers you can compare side by side.
Municipal bonds and Treasuries often show lower yields than CDs, savings accounts and corporate bonds because part of their income skips tax. Interest from most municipal bonds is free of federal income tax, and of state tax when the bond comes from your own state. Interest from Treasury bills, notes and bonds is taxed federally but exempt from state and local income tax. A lower headline yield can still leave you more money once taxes are paid.
The answer depends on your own tax rates. The same 3.5% muni is worth about 3.98% taxable to someone in the 12% federal bracket who pays no state tax, and about 6.03% to someone in the 37% bracket who pays a 5% state rate. That is why this tax-equivalent yield calculator asks for your rates instead of assuming them.
Use this TEY calculator to compare yields at your own tax rates. As a muni bond vs taxable bond calculator, it shows which yield leaves you more income after tax.
Tax-equivalent yield formula
The tax-equivalent yield formula divides the tax-free yield by 1 minus the tax rate it avoids. Use your marginal rates as decimals, and add your federal and state rates together for income that both of them tax.
The formulas below assume NIIT and the state deduction are off. When selected, the calculator adds NIIT to taxable and Treasury income and uses state rate x (1 - federal rate) as the state portion.
For a municipal bond
For a muni from your own state, which skips federal and state income tax: tax-equivalent yield = muni yield / (1 - federal rate - state rate). A 3.5% muni at a 24% federal and 5% state rate works out to 3.5% / 0.71 = 4.93%.
For a muni from another state, which skips federal tax but not state tax: tax-equivalent yield = muni yield x (1 - state rate) / (1 - federal rate - state rate). The same 3.5% muni equals 3.5% x 0.95 / 0.71 = 4.68% taxable.
For a Treasury bill, note or bond
Treasury interest is taxed federally, so federal tax applies to both sides of the comparison and only the state tax makes a difference: tax-equivalent yield = Treasury yield x (1 - federal rate) / (1 - federal rate - state rate). A 4.2% T-bill at 24% federal and 5% state equals 4.2% x 0.76 / 0.71 = 4.50% from a CD or savings account. Dividing the T-bill yield by 1 minus the state rate alone, a common shortcut, gives 4.42% and understates the T-bill's edge.
For a Treasury fund or money market fund
A fund passes the state exemption on only for the share of its income that comes from Treasury interest. With that share as a decimal: tax-equivalent yield = fund yield x (1 - federal rate - state rate x (1 - share)) / (1 - federal rate - state rate). At a 100% share it matches the Treasury formula.
After-tax yield
After-tax yield = yield x (1 - the tax rate that applies to it). A 4% CD keeps 4% x 0.71 = 2.84% at a combined 29% rate. Comparing after-tax yields gives the same answer as comparing tax-equivalent yields, from the other direction.
In a spreadsheet
With the tax-free yield in cell B1 and your combined rate in cell B2, both formatted as percentages, the formula =B1/(1-B2) returns the tax-equivalent yield.
Muni bonds vs taxable bonds: a worked example
Say you are choosing between a municipal bond fund from your own state that yields 3.5% and a CD that pays 4%. Your federal tax rate is 24% and your state rate is 5%, a combined 29%.
The muni pays no federal or state income tax, so you keep the full 3.5%: $3,500 a year on $100,000. The CD is taxed by both, so you keep 4% multiplied by 0.71, or 2.84%: $2,840 a year.
To match the muni after tax, a fully taxable yield would need 3.5% divided by 0.71, or 4.93%. A Treasury bill would need 4.61%, because its interest skips state tax, and an out-of-state muni 3.68%, because only your state taxes it.
Change the rates and the answer moves. At a 12% federal rate in a state with no income tax, the same muni equals only 3.98% taxable, so the 4% CD keeps slightly more. Yields are only part of the choice: the risk section below covers what they leave out.
Treasury bills vs CDs and savings after state tax
Treasury bills, CDs and high-yield savings accounts usually pay similar short-term rates, so taxes can decide which one leaves you more. All three are taxed federally. The difference is state and local income tax: Treasury interest is exempt from it, while CD and savings interest is taxed as ordinary income, federal and state.
To compare them, choose Treasury above and enter the T-bill yield, or press Use this rate for the latest 3-month yield GNG has. Put the CD or savings rate in Compare with a taxable yield. At a 24% federal and 5% state rate, a 4.2% T-bill keeps 3.19% after tax, while a 4% CD keeps 2.84%. The CD would need about 4.50% to match the T-bill.
In a state with no income tax the two are taxed the same way, so the higher yield wins. The higher your state rate, the more the exemption is worth: at a 9.3% state rate, a CD would need about 4.79% to match the same 4.2% T-bill.
Taxes are one part of the choice. Savings deposits are FDIC insured up to $250,000 per depositor, per bank, CDs can charge a penalty for early withdrawal, and a T-bill pays its full face value at maturity.
The passive income calculator compares the income before tax, next to price risk and principal protection.
Treasury funds, muni funds and money market funds
Funds pass their tax treatment on to you, but not always in full. A Treasury ETF such as SGOV, BIL or USFR holds short-term Treasury securities, and the share of its dividends that comes from Treasury interest is usually exempt from state income tax. The fund publishes that share each year in its tax information after the year ends, and it is usually not shown on the 1099 itself.
Some states exempt only the share of a fund's income that comes from US Treasury interest, and some apply that only when the fund holds at least half its assets in US government obligations. Check your state's rules. Choose Treasury fund above and enter the share from the fund's tax letter.
Government money market funds can hold repurchase agreements and agency debt alongside Treasuries, so their state-exempt share can be much lower than a Treasury ETF's. Check the fund's own figure before you count on the exemption.
National municipal bond funds such as MUB and VTEB hold bonds from many states. Their income is generally free of federal income tax, while your state usually taxes all but the share that comes from your own state, so Muni, other state is the closer choice for most investors. A fund that holds only your own state's bonds can be free of both taxes for residents.
To fill the yield from a fund, enter its ticker and press Fill. GNG uses the fund's payouts over the last 12 months and its latest price, the same figure its GNG dividend history page shows. The fund's 30-day SEC yield, on its own site, can differ.
To compare Treasury, muni and other bond funds side by side, see the fixed income sector page.
Which tax rate to use
Use your marginal rate, the rate on your next dollar of income, not your average rate. Interest is added on top of your other income, so it is taxed at your top bracket.
For the state field, use your top state rate and add any city income tax. Enter 0% if your state has no income tax.
If your modified adjusted gross income is over $200,000 single or $250,000 joint, the 3.8% net investment income tax can apply to taxable and Treasury interest. Muni interest is exempt. Choose Yes only to assume the full 3.8% applies at the margin to this income. The calculator does not determine your NIIT liability.
For 2026, the federal SALT deduction cap is $40,400, or $20,200 if married filing separately. It phases down by 30% of modified adjusted gross income above $505,000 ($252,500 if married filing separately) and cannot fall below $10,000 ($5,000 if married filing separately). This calculator does not work out your deduction limit. Choose Yes only when the full state and local tax on this income is deductible on your federal return. With that simplifying assumption, the calculator uses federal rate + state rate x (1 - federal rate).
Inside an IRA or 401(k), interest is not taxed each year, so compare yields as they are. A muni's tax break does not help there, because withdrawals from a traditional IRA or 401(k) are taxed as income.
Qualified dividends are taxed at 0%, 15% or 20% federally. For 2026 the 0% rate covers taxable income up to $49,450 single and $98,900 joint, and 20% starts above $545,500 single and $613,700 joint. These are taxable-income thresholds from IRS Revenue Procedure 2025-32, not a check of whether a dividend qualifies.
To compare dividend income after tax, use the monthly dividend calculator with your dividend tax rate.
To include reinvestment, use the DRIP calculator with your dividend tax rate.
2026 federal tax brackets
Amounts are taxable income, from IRS Revenue Procedure 2025-32.
What the yield comparison leaves out
A yield comparison shows income, not risk. Munis carry credit risk, and many can be called before they mature. Bond fund prices rise and fall with interest rates, and longer bonds move more. Savings deposits are FDIC insured up to $250,000 per depositor, per bank, while Treasuries are backed by the US government.
Taxes have exceptions too. Interest on some private activity munis counts toward the alternative minimum tax. A muni bought below its face value can create taxable income, and the de minimis rule decides whether that gain is taxed as income or as a capital gain. Capital gains from selling a bond or fund are taxed even when its interest is not.
Use the comparison as one input alongside credit quality, maturity and how soon you may need the money. The results are before fees and price changes and are not a forecast.
How we calculate
This calculator adds your federal and state rates for income that both of them tax, a common convention for tax-equivalent yield. It applies federal tax only to Treasury interest, state tax only to out-of-state munis, no income tax to munis from your own state and, for a Treasury fund, state tax only to the share that is not Treasury interest. The 3.8% net investment income tax and the state tax deduction apply only when you turn them on.
The 2026 brackets and qualified dividend thresholds come from IRS Revenue Procedure 2025-32, the net investment income tax from IRS Topic 559, and the tax treatment of Treasury and municipal interest from IRS Publication 550. We update the bracket table each year when the IRS publishes the new figures. Results leave out the alternative minimum tax, fees and price changes.
Tax-equivalent yield calculator FAQ
- What is tax-equivalent yield?
- Tax-equivalent yield is the yield a fully taxable investment, such as a CD or a corporate bond, must pay to leave you the same income after tax as a tax-free yield. A 3.5% muni equals a 4.93% taxable yield at a combined 29% federal and state tax rate.
- How do you calculate tax-equivalent yield?
- Divide the tax-free yield by 1 minus your tax rate: 3.5% divided by 0.71 is 4.93% at 24% federal and 5% state tax. For a Treasury, federal tax applies to both sides, so multiply a 4.2% T-bill yield by 0.76 and divide by 0.71 to get a 4.50% taxable match.
- Are Treasury bills exempt from state tax?
- Yes. Treasury interest is federally taxed but exempt from state and local income tax. A fund passes on only its Treasury-interest share. Some states require at least half its assets in US government obligations. Check your state's rules.
- Are municipal bonds tax free?
- Interest on most munis is free of federal income tax, and of state tax when the bond comes from your own state. Out-of-state munis are usually taxed by your state, some private activity bonds count toward the alternative minimum tax, and capital gains are taxable.
- At what tax bracket do municipal bonds make sense?
- When the muni's tax-equivalent yield beats the taxable yield you can get. A 3.5% muni from your state beats a 4.5% CD once your combined federal and state rate is above about 22%, because 3.5% is 78% of 4.5%. Enter your rates to see where they cross.
- Is this tax-equivalent yield calculator free?
- Yes. It runs in your browser with no account and no sign-up. A free GNG account adds the Portfolio Tracker, which follows the dividends your own holdings pay, including muni and Treasury funds.
Track the payouts your muni and Treasury funds make in the Portfolio Tracker with a free GNG account.
Sign Up FreeThis calculator is for education and is not tax or investment advice. Results use the rates you enter and leave out the alternative minimum tax, capital gains, fees and price changes. Read our disclosures.