Muni Yields
The yield on a California municipal bond or bond fund is higher, in effect, for anyone who pays state and federal taxes. The higher your tax rate, the higher the taxable yield you would need in order to end up with as much money as a tax-free yield gives you. Equivalent yields at various tax rates:
Taxable income brackets (Joint income): $42,351 to $52,090
Federal and state tax rates: 28+6%
Combined effective rate: 32.3%
A current California tax-free yield of 3% is equivalent to a taxable yield of: 4.43%
A current California tax-free yield of 4% is equivalent to a taxable yield of: 5.91%
A current California tax-free yield of 5% is equivalent to a taxable yield of: 7.39%
A current California tax-free yield of 6% is equivalent to a taxable yield of: 8.86%
A current California tax-free yield of 7% is equivalent to a taxable yield of: 10.34%
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Taxable income brackets (Joint income): $52,091 to 65,832
Taxable income brackets (Single income): $25,351 to 32,916
Federal and state tax rates: 28+8%
Combined effective rate: 33.8%
A current California tax-free yield of 3% is equivalent to a taxable yield of: 4.53%
A current California tax-free yield of 4% is equivalent to a taxable yield of: 6.04%
A current California tax-free yield of 5% is equivalent to a taxable yield of: 7.55%
A current California tax-free yield of 6% is equivalent to a taxable yield of: 9.06%
A current California tax-free yield of 7% is equivalent to a taxable yield of: 10.57%
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Taxable income brackets (Joint income): $65,833 to 102,300
Taxable income brackets (Single income): $32,917 to 61,400
Federal and state tax rates: 28+9.3%
Combined effective rate: 34.7%
A current California tax-free yield of 3% is equivalent to a taxable yield of: 4.59%
A current California tax-free yield of 4% is equivalent to a taxable yield of: 6.13%
A current California tax-free yield of 5% is equivalent to a taxable yield of: 7.66%
A current California tax-free yield of 6% is equivalent to a taxable yield of: 9.19%
A current California tax-free yield of 7% is equivalent to a taxable yield of: 10.72%
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Taxable income brackets (Joint income): $102,301 to 155,950
Taxable income brackets (Single income): $61,401 to 128,100
Federal and state tax rates: 31+9.3%
Combined effective rate: 37.4%
A current California tax-free yield of 3% is equivalent to a taxable yield of: 4.79%
A current California tax-free yield of 4% is equivalent to a taxable yield of: 6.39%
A current California tax-free yield of 5% is equivalent to a taxable yield of: 7.99%
A current California tax-free yield of 6% is equivalent to a taxable yield of: 9.59%
A current California tax-free yield of 7% is equivalent to a taxable yield of: 11.19%
*
Taxable income brackets (Joint income): $155,951 to 278,450
Taxable income brackets (Single income): $128,101 to 278,450
Federal and state tax rates: 36+9.3%
Combined effective rate: 42.0%
A current California tax-free yield of 3% is equivalent to a taxable yield of: 5.17%
A current California tax-free yield of 4% is equivalent to a taxable yield of: 6.90%
A current California tax-free yield of 5% is equivalent to a taxable yield of: 8.62%
A current California tax-free yield of 6% is equivalent to a taxable yield of: 10.37%
A current California tax-free yield of 7% is equivalent to a taxable yield of: 12.07%
*
Taxable income brackets (Joint income): More than $278,450
Taxable income brackets (Single income): More than $278,450
Federal and state tax rates: 39.6+9.3%
Combined effective rate: 45.2%
A current California tax-free yield of 3% is equivalent to a taxable yield of: 5.47%
A current California tax-free yield of 4% is equivalent to a taxable yield of: 7.30%
A current California tax-free yield of 5% is equivalent to a taxable yield of: 9.13%
A current California tax-free yield of 6% is equivalent to a taxable yield of: 10.95%
A current California tax-free yield of 7% is equivalent to a taxable yield of: 12.87%
Note: Federal brackets calculated from published data; 1997 brackets used for California.
Source: Zane Mann, California Municipal Bond Advisor
