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Tax-Equivalent Yield: Leveraging the Power of Tax-Free Income

Earning income tax-free can be extremely attractive and beneficial for all investors, particularly those in higher tax brackets. Learn about tax-equivalent yield and the power of tax-free income.

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8/17/2023

5 min read


Topic

Fixed Income

Key takeaways

  • Taxes can have a significant impact on investor net income and total return.
  • Calculating the tax-equivalent yield for taxable versus tax-exempt investments is a prudent exercise with potentially material results.
  • Investing in tax-exempt securities, such as municipal bonds, may offer investors significant benefits, including enhanced net income, total return, portfolio diversification, and risk-adjusted performance.
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