This taxable-equivalent yield calculator is able to determine the federally tax exempt equivalent, as well as the tax-free yield, of a bond that is not subject to federal or state income taxes. The calculator only requires five inputs: the current bond price, the bond's par value, the coupon rate on the bond, as well as your state and federal income tax brackets.
Calculator Definitions
The variables used in our online calculator are defined in detail below, including how to interpret the results.
Current Bond Price ($)
This is the current selling price, or the market price of the bond. This is the price you'd have to pay to acquire this particular bond.
Bond Par Value ($)
This is the bond's par value. The par value of a bond is also known as the bond's face value or redemption value. This is the value the investor would receive for the bond on its maturity date.
Bond Coupon Rate (%)
The bond coupon rate is the rate of interest paid by the bond, based on the bond's par value. For example, a bond with a par value of $1,000, and a coupon rate of 5.000%, would pay the bearer of the bond $50 per year.
Federal Income Tax Bracket (%)
This is your marginal federal income tax bracket. If you're unsure of this value, we have several tax rate calculators that can help determine the correct input. Former tax brackets include 10%, 15%, 25%, 28%, 33%, and 35%; those starting in 2018 include 10%, 12%, 22%, 24%. 32%, 35% and 37%.
State Income Tax Bracket (%)
This is your marginal state income tax bracket. If you're unsure of this value, you can look at our article on state income tax rates.
Fully -Taxable Bond Yield (%)
The fully-taxable bond yield is the effective rate of interest paid to the bond holder, based on the price paid for the bond, and the interest payments made on the bond.
Federally Tax Exempt Equivalent (%)
This is the equivalent bond yield for a government or municipal bond that is free from federal income taxes.
Federal and State Tax Exempt Equivalent (%)
This is the equivalent bond yield for a government or municipal bond that is free from both federal as well as state income taxes.
Taxable-Equivalent Yield Calculator
Disclaimer: These online calculators are made available and meant to be used as a screening tool for the investor. The accuracy of these calculations is not guaranteed nor is its applicability to your individual circumstances. You should always obtain personal advice from qualified professionals.
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