Tax-Equivalent Income

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Tax-Equivalent Income

The income one derives from a taxable investment that equals the yield of a tax-free investment with less income. A corporate bond yields less than its stated interest rate because of taxation, whereas a tax-exempt municipal bond does not. Thus, a municipal bond that pays a lower interest rate will often net the bondholder more than a corporate bond with a slightly higher interest rate, depending upon one's tax bracket. The tax equivalent income is the extra income required from a corporate bond to equal the post-tax income of a municipal bond. See also: Municipals-over-bonds spread, After-tax basis.
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Our tax equivalent margin remains steady with increased tax equivalent income realized through our investment portfolio.
Our tax equivalent margin is improving with increased tax equivalent income realized through the restructuring of our investment portfolio, and new investments in this low rate environment have been minimal.
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