Common questions

What is after tax yield?

What is after tax yield?

The after-tax yield or after-tax return is the profitability of an investment after all applicable taxes have been paid. The type of tax paid and the investor’s marginal tax rate affect the amount of the after tax yield.

What is the true equivalent yield?

Equivalent Yield (true and nominal) is a weighted average of the Net Initial Yield and Reversionary Yield and represents the return a property will produce based upon the timing of the income received. The true equivalent yield assumes rents are received quarterly in advance.

How do you calculate the after tax yield?

After-tax yield can be calculated by simply multiplying the pre-tax yield by a multiple that incorporates the marginal tax rate on the bond. This formula is ATY=PTY∗(1−MTR){\\displaystyle ATY=PTY*(1-MTR)} where ATY is the after-tax rate, PTY is the pre-tax rate, and MTR is the marginal tax rate.

How to calculate tax equivalent yield on bonds?

In addition, if the bond was issued in the state of residence, you can also avoid state income taxes. Use this tax equivalent yield calculator to determine the yield required by a fully taxable bond to earn the same after tax income as a municipal bond. This is the annual yield of your municipal bond or bond fund.

How is the yield on a municipal bond calculated?

This is the annual yield of your municipal bond or bond fund. This is your total income, after exemptions, adjustments, and deductions. We use this, along with your filing status, to determine your marginal income tax rate.

How does a financial advisor calculate after tax yield?

Your financial advisor calculates the after tax yield on your investments. Knowing the after-tax yield of your investments enables you to effectively compare them to tax-free investments, such as mutual bonds. Also, your financial advisor can use the information to increase the tax efficiency of your investments over the long term.

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