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Tax-exempt/Taxable Yield Equivalents

The table below will help you determine the amount of income you require from a taxable investment to equal the yield on a taxexempt bond. The table is for illustrative purposes only and is not intended to be representative of any specific security. To use the table most effectively, follow the directions in italics at the left side of the chart.

To view the tax-exempt/taxable yield equivalents and state taxation of municipal bonds for individuals and corporations charts in PDF* format, click here.

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Taxable Income*
HOW TO USE THIS CHART

1. Find the appropriate return (single or joint).

2. Determine your tax bracket by locating the taxable income category that you fall into. Taxable income is income after appropriate exemptions and deductions are taken. (The table does not account for special provisions affecting federal tax rates, such as the alternative minimum tax.)

3. The numbers in the column under your tax bracket give you the approximate taxable yield equivalent for each of the tax-exempt yields in the near left column.

Example: If you are single and have a taxable income of $80,000 ($132,000 if married), you would fall into the 28% tax bracket. According to the table, you would need to earn 6.94% on a taxable security to match a 5% yield from a tax-exempt security.

 Single Return $0- $8,025  $8,026- $32,550  $32,551- $78,850  $78,851- $164,550  $164,551- $357,700  $357,701- & over  SAMPLE EFFECTIVE MARGINAL RATE FOR CERTAIN HIGH–INCOME TAXPAYERS
Joint Return $0- $16,050  $16,051- $65,100  $65,101- $131,450  $131,451- $200,300  $200,301- $357,700  $357,701- & over 
Tax Bracket 10% 15% 25% 28% 33% 35% 36%
Tax-Exempt Yields (%) Taxable Yield Equivalents (%)
1.0% 1.11% 1.18% 1.33% 1.39% 1.49% 1.54% 1.56%
1.5 1.67 1.76 2.00 2.08 2.24 2.31 2.34
2.0 2.22 2.35 2.67 2.78 2.99 3.08 3.13
2.5 2.78 2.94 3.33 3.47 3.73 3.85 3.91
3.0 3.33 3.53 4.00 4.17 4.48 4.62 4.69
3.5 3.89 4.12 4.67 4.86 5.22 5.38 5.47
4.0 4.44 4.71 5.33 5.56 5.97 6.15 6.25
4.5 5.00 5.29 6.00 6.25 6.72 6.92 7.03
5.0 5.56 5.88 6.67 6.94 7.46 7.69 7.81
5.5 6.11 6.47 7.33 7.64 8.21 8.46 8.59
6.0 6.67 7.06 8.00 8.33 8.96 9.23 9.38
6.5 7.22 7.65 8.67 9.03 9.70 10.00 10.16
7.0 7.78 8.24 9.33 9.72 10.45 10.77 10.94
7.5 8.33 8.82 10.00 10.42 11.19 11.54 11.72
* The income brackets to which the tax rates apply are adjusted annually for inflation. Those listed above are for 2008.
** The Internal Revenue Code phases out a portion of the personal exemption deduction for taxpayers with adjusted gross income in excess of $239,950 (married, filing jointly) and $159,950 (single taxpayers). In addition, certain itemized deductions are reduced for taxpayers with adjusted gross income in excess of $159,950. In general, the limit on itemized deductions will increase the effective marginal tax rate by 0.7%, and the personal exemption phaseout will increase the effective marginal tax rate by 0.6% for each exemption claimed.

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