Berney; RE:" Figuring Taxable Equivalent Yields "
The biz nooz in the Bay Area is in the San Jose Mercury News,
as the local San Francisco Chronicle will have big spreads
about massive burst of radiation from some far-off
anomaly disrupting satellites and making weird karma ju-ju
for everybody - and BTW, it's sunny tomorrow for the Castro Street
Fair, citizens.
But there was this interesting table in the biz-nooz section today.
Figuring Taxable Equivalent Yields
To find out whether a tax-free investment makes sense for you,
compare its taxable equivalent yield to the yield available on
taxable investments with similar maturity, using this calculation:
Tax Free Yield
Taxable Equivalent Yield = ------------------------------
( 1 - Your Tax Bracket ) *
Suppose a taxpayer in the 31 percent federal tax bracket can
get 5 percent on a 30-year Treasury Bond or 4.8 percent on a 30-year
California Municipal Bond. The taxable equivalent yield on the
municipal bond is 6.95 percent.
4.8% Tax Free Yield
Taxable Equivalent 6.95% = ------------------------------
( 1 - 0.31 Tax Bracket )
From a tax standpoint alone, this investor is better off in
municipals, because 6.95% is higher than 5 percent.
* if you are comparing California municipals, which are free of
federal and state taxes, to a fully taxable investment,
use your combined federal-state tax rate from the table below. If
you are comparing a California municipal to a Treasury Bond, use
only your federal tax rate in the calculation because Treasury
securities are free from state, but not federal taxes.
1998 Income Tax Brackets
Taxable Taxable
(joint) (single) COMBINED TAX
Income Income FED Tax STATE Tax RATE **
---------- ------------ --------- ----------- ---------------
$42,351 -
$52,090 28.0 % 6.0 % 32.3 %
$52,091 - $25,351 -
$65,832 $32,916 28.0 % 8.0 % 33.8 %
$65,833 - $32,917 -
102,300 $61,400 28.0 % 9.3 % 34.7 %
102,301 - $61,401 -
151,950 128,100 31.0 % 9.3 % 37.4 %
151,951 - 128,101 -
278,450 278,450 36.0 % 9.3 % 42.0 %
278,450 + 278,450 + 39.6 % 9.3 % 45.2 %
** state taxes are deductible on federal tax return.
...so, that's the report from your man in good ju-ju land, California.
-Steve (^_^) |
