Muni Bond question

[marc515]

Can any of you guys point me in the direction to a site where I can put in my federal and state income "effective tax rates" so I can figure out at what point it makes sense to buy Muni's vs other investments such as CD's, and taxable bonds, etc.?

Thank you

 

[MichaelB]

Can any of you guys point me in the direction to a site where I can put in my federal and state income "effective tax rates" so I can figure out at what point it makes sense to buy Muni's vs other investments such as CD's, and taxable bonds, etc.?

Thank you

Morningstar has a good set of basic tools. http://screen.morningstar.com/BondCalc/BondCalculator_TaxEquivalent.html

 

[pb4uski]

If you take the muni bond rate divided by (1-t) you will get the taxable rate equivalent.

t is your marginal tax rate (the rate on the last dollar of income).

So for example if you are in the 28% tax bracket and are looking at a muni yielding 3% earning 3% tax-free is the same as earning 4.2% and paying 28% in tax.

 

[marc515]

Thanks guys!