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State-income tax equivalent yield
Q
I just checked out the site. It is very good. I will probably open an account in the coming weeks. Do you have a formula that can be used to factor state income tax to determine tax equivalent yield? Also do you have a formula to consider when it makes sense to buy munis when someone is paying the Alternative Minimum Tax?
A
James A. Klotz responds:
We can’t provide a general formula because tax rates vary from state to state. Although most states do not tax bonds from “in-state” issuers, there are exceptions.
Most investors from high income-tax states restrict their purchases to issues from their home state.
There are many municipal bonds available, which are not subject to the AMT.
Start here.
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