What this calculator does
Taxable equivalent yield works out the taxable yield needed to match a tax-free bond after tax. Enter your own figures above and the answer updates as you type: nothing is fixed in the code, so the result reflects exactly the numbers you supply.
The formula this calculator evaluates is printed under the tool and explained below, so you can check the working by hand or reuse it in a spreadsheet.
The formula
FormulaTaxable equivalent yield = Tax-free yield / (1 − Marginal tax rate)
The inputs explained
| Field | What to enter |
|---|---|
| Tax-free yield (%) | A number, measured in %. Starts at 4. |
| Marginal tax rate (%) | A number, measured in %. Starts at 32. |
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How the answer changes with tax-free yield
Every other input is held at the calculator’s starting values while tax-free yield varies. Select any row to load that scenario into the calculator.
How the answer changes with tax-free yield
| Tax-free yield (%) | Taxable equivalent yield | Extra yield a taxable bond must offer | After-tax return if you held that taxable yield |
|---|---|---|---|
| 2 | 2.94% | 0.941% | 2.00% (matches the tax-free yield) |
| 3 | 4.41% | 1.41% | 3.00% (matches the tax-free yield) |
| 4 | 5.88% | 1.88% | 4.00% (matches the tax-free yield) |
| 6 | 8.82% | 2.82% | 6.00% (matches the tax-free yield) |
| 8 | 11.8% | 3.76% | 8.00% (matches the tax-free yield) |
| 12 | 17.6% | 5.65% | 12.0% (matches the tax-free yield) |