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Good formula to remember from US Savings Bonds Advisor:
"Question: If a Savings Bond is earning 3.60% and isn't subject to state income tax, what is the equivalent rate for an investment that is subject to state income tax?
Tom responsed:
The formula you're looking for is [savings bond rate] / ( 1 - [state tax rate]).
For example, if your state income tax rate is 5%:
"Question: If a Savings Bond is earning 3.60% and isn't subject to state income tax, what is the equivalent rate for an investment that is subject to state income tax?
Tom responsed:
The formula you're looking for is [savings bond rate] / ( 1 - [state tax rate]).
For example, if your state income tax rate is 5%:
- 1 - .05 = .95 (the percentage you get to keep after taxes)
- 3.6% / .95 = 3.789% (the equivalent taxable yield you'd need to equal the state-tax-free yield) "