Tax Equivalent Yield and Comparative Investments
 |
 |
Tax-Exempt Yield |
|
| Taxable Income ($1,000)* |
Federal
Tax Rate |
3.00% |
3.50% |
4.00% |
4.50% |
5.00% |
5.50% |
|
| Single Return |
Joint Return |
|
Taxable Equivalent Yield |
|
| 28.401-68.800 |
56.801-114.650 |
25% |
4.00% |
4.67% |
5.33% |
6.00% |
6.67% |
7.33% |
|
| 68.801-143.500 |
114.651-174.700 |
28% |
4.17% |
4.86% |
5.56% |
6.25% |
6.94% |
7.64% |
|
| 143.501-311.950 |
174.701-311.950 |
33% |
4.48% |
5.22% |
5.97% |
6.72% |
7.46% |
8.21% |
|
| Over 311.950 |
Over 311.950 |
35% |
4.62% |
5.38% |
6.15% |
6.92% |
7.69% |
8.46% |
|
|
The chart above illustrates the benefits tax-exempt municipal
bonds have vs. taxable securities. For example, if an investor
in the federal tax rate of 25% owns a municipal bond with
a yield of 3%, their taxable
equivalent yield is 4%. The investor would have to purchase
a taxable security yielding at least 4% in order to match
the 3% municipal bond.
Comparable Yields for Various Fixed Income Securities
Information Based on the Following:
Filing Status: Head of Household
Principal State of Residence: Massachusetts
Local Tax Rate: 0%
State Tax Rate: 5.3%
Federal Tax Rate: 35%
| Municipal In State |
Municipal Out of State |
Treasury and Agency |
Corporate |
|
|
| None |
Federal, State & Local |
State & Local |
Federal |
|
|
| 1.00% |
1.04% |
1.54% |
1.62% |
|
| 1.25% |
1.29% |
1.92% |
2.03% |
|
| 1.50% |
1.55% |
2.31% |
2.44% |
|
| 1.75% |
1.81% |
2.69% |
2.84% |
|
| 2.00% |
2.07% |
3.08% |
3.25% |
|
| 2.25% |
2.33% |
3.46% |
3.66% |
|
| 2.50% |
2.59% |
3.85% |
4.06% |
|
| 2.75% |
2.85% |
4.23% |
4.47% |
|
| 3.00% |
3.11% |
4.62% |
4.87% |
|
| 3.25% |
3.37% |
5.00% |
5.28% |
|
| 3.50% |
3.62% |
5.38% |
5.69% |
|
| 3.75% |
3.88% |
5.77% |
6.09% |
|
| 4.00% |
4.14% |
6.15% |
6.50% |
|
| 4.25% |
4.40% |
6.54% |
6.90% |
|
| 4.50% |
4.66% |
6.92% |
7.31% |
|
| 4.75% |
4.92% |
7.31% |
7.72% |
|
| 5.00% |
5.18% |
7.69% |
8.12% |
|
| 5.25% |
5.44% |
8.08% |
8.53% |
|
| 5.50% |
5.70% |
8.46% |
8.94% |
|
| 5.75% |
5.96% |
8.85% |
9.34% |
|
| 6.00% |
6.21% |
9.23% |
9.75% |
|
| * The impact of federal and/or state
alternative minimum taxes is not reflected in
this analysis. |
|
|
The chart above demonstrates the advantages of investing in in-state bonds (in this case, Massachsuetts) vs. out-of-state, treasury and agency or corporate vehicles.
Send Us Your Questions or Comments
Bond investment can be complex. If you have any questions, comments or suggestions
regarding what you've read here, let us know. We'll do our
best to answer your queries or make requested changes when
required. Contact us at info@corbycapital.com,
1-800-736-7076 (toll free) or (617) 482-8780.
The material provided is for informational purposes only: While this information is from sources believed to be reliable, its accuracy is not guaranteed. If you need legal or tax advice please consult a professional in these areas.
