• Bonds
  • Munis vs. Taxables: How to Determine the Taxable Equivalent Yield

    by Maria Crawford Scott

    With yields on the safest fixed-income investments still very low, one way to boost your bottom line is to shield that income from further erosion.

    Interest income that is sheltered from federal taxation—and possibly state and local taxes as well—has always been the main attraction of municipal bonds.

    However, tax-advantaged bonds generally offer a lower coupon rate than taxable bonds of similar maturity, such as government bonds.

    How do you compare the yields of bonds that receive different tax treatments?

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    Maria Crawford Scott is the former editor of the AAII Journal.


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