Strategic tax planning for a secure financial future.
Linda's primary concern is mitigating the tax burden on her deferred compensation. She's considering various investment options, including municipal bonds and taxable corporate bonds, but struggles to determine which offers the best after-tax return, given her high income bracket and the impending partnership buyout which will further increase her taxable income. She needs a clear, quantifiable comparison to make an informed decision.
By using the Tax Equivalent Yield Calculator, we can compare the after-tax returns of different investment options. For instance, a taxable corporate bond yielding 5% might be equivalent to a municipal bond yielding 3.5% after considering Linda's combined federal and state income tax rate. This allows for a direct, apples-to-apples comparison, empowering Linda to make choices that optimize her after-tax returns and preserve more of her $1.5 million.
The Tax Equivalent Yield Calculator allows for quick comparison of taxable and tax-exempt investments by factoring in the client's marginal tax rate. We input the yield of the taxable investment and Linda’s combined tax rate to determine the equivalent tax-exempt yield, or vice versa.
$60,000 in potential tax savings over 10 years by strategically allocating investments based on tax-equivalent yield analysis.
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