What taxable yield matches my tax-exempt interest after federal, state and investment taxes?

Compare two ordinary-interest investments using your marginal federal and state rates and separately selected exemption assumptions. See the comparison yield required to match the reference, after-tax income, and balances under the same reinvestment frequency. No security's exemption or risk is inferred from its name.

Investment principal

Reference investment nominal annual yield (%)

Comparison investment nominal annual yield (%)

Federal marginal ordinary rate (%)

State marginal income tax rate (%)

Reference interest exempt from federal income tax

Reference interest exempt from state income tax

Reference interest excluded from NIIT

Comparison interest exempt from federal income tax

Comparison interest exempt from state income tax

Comparison interest excluded from NIIT

Apply full 3.8% NIIT to nonexempt interest

Select only when all modeled nonexempt interest is subject to NIIT; partial threshold exposure is outside this marginal-rate comparison.

Federal/state joint tax assumption

The deduction choice uses federal + state x (1 - federal) + NIIT. It assumes full marginal SALT deductibility, including any state tax on federally exempt interest; it does not test SALT limits or AMT.

Reinvestment years

Interest and tax settlement frequency

After-tax interest is reinvested at the same rate; taxes are paid each period. Enter nominal rates on the same basis, not unlike APY and coupon rates.

Include AMT, market discount, premiums, sale gains, or a tax-deferred account

tax equivalent yield calculator

Quick answer

Also answers

after tax yield calculator
taxable equivalent yield
municipal bond after tax interest
Treasury tax equivalent yield

Good fit when

Comparing ordinary taxable and exempt interest
Evaluating Treasury versus municipal exemption assumptions
Consistent after-tax reinvestment scenarios

Have ready

Reference and comparison nominal annual yields
Federal/state marginal rates and each investment's exemptions
NIIT and state-tax deduction assumptions
Principal, years and reinvestment frequency

Result you get

Required comparison yield, both after-tax yields, interest income, combined rates and after-tax ending balances.

dividend tax calculator niit estimator capital gains tax calculator 2027 published amounts and planning status

How this calculation works

Treat entered yields as nominal annual ordinary-interest rates on a consistent basis.
Apply separate federal, state and NIIT exemptions to both investments.
Combine ordinary federal and state rates additively, or use an explicitly elected full federal state-tax deduction assumption. NIIT remains additive.
Calculate annual after-tax interest and the comparison yield that matches the reference.
Reinvest after-tax periodic interest at unchanged rates for the selected whole-number horizon.

Common mistakes and caveats

Only ordinary-interest marginal-rate scenarios are supported; no bond pricing, YTM, discount/premium amortization, AMT, capital gains or retirement accounts.
State exemption depends on the instrument and jurisdiction. Inputs are assumptions that must be confirmed independently.
Full NIIT exposure must apply to all nonexempt modeled interest; partial MAGI threshold exposure is not computed.
The federal state-tax deduction mode requires full incremental deductibility; tax savings should not be assumed when SALT limits or other restrictions eliminate it.

FAQ

What is the tax-equivalent yield formula?

Divide the reference investment's after-tax nominal yield by the comparison investment's after-tax retention fraction. A fully exempt 4% reference and 24%-taxed comparison require 4% / 0.76, about 5.2632%, before tax.

Can I compare an out-of-state municipal bond with a Treasury?

Yes, using verified exemptions for each instrument. A municipal bond can be federally exempt but state-taxable; ordinary Treasury interest is generally federally taxable and state-exempt. Select each assumption separately rather than assuming all bonds receive the same exemptions.

Why are federal and state rates not always simply added?

The additive mode assumes no marginal federal deduction for state taxes. The full-deduction mode offsets state tax by your federal marginal rate, assuming those extra state taxes are fully deductible. It does not check SALT limits, AMT or whether you itemize.

Does federal municipal-interest exemption also remove NIIT?

Federally tax-exempt ordinary municipal interest is excluded from net investment income. The form blocks federal exemption combined with NIIT-taxable treatment. Applying full NIIT to other interest is an explicit assumption, not a MAGI eligibility determination.

How is after-tax compounding calculated?

Taxes are assumed paid each selected interest period and only the remaining interest is reinvested. Both investments use constant nominal annual rates and identical frequency. An APY should not be compared directly with a nominal coupon without converting to a consistent basis.

Does a higher after-tax yield make one bond a better investment?

No. Credit quality, duration, liquidity, price changes, fees and redemption terms are not modeled. The calculator blocks AMT, premium, market-discount and sale-gain scenarios rather than presenting a complete bond total return.

Last updated & sources

Last updated October 13, 2026.

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