Oct 26
Tip for Comparing Tax-Free/Taxable Bonds
With interest rates rising, income-producing bonds have become more attractive to many investors. Municipal bonds are one good option -- income from their coupon payments are usually not subject to Federal income tax, and are also free from state income tax (in most cases) if issued in your state of residence. Given this, how do you compare a fully-taxable corporate bond paying a higher yield to a municipal bond?
Here's an online calculator that makes it easy -- showing the yield required by a fully taxable bond to earn the same after-tax income as a given municipal bond.
For more on getting into the bond market, see The Radical Guide to Bond Investing.
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