Treasuries are not taxed at state and local level. Munis are not taxed at any level at times.

What formula is used to compare APY between different investment assets, given:

  • CD, Treasuries, Munis at 10%.

  • Effective tax rate 12%.

  • Effective state/local tax rate 3%.

What is "true" APY between three assets given tax-free status of treasuries and munis at a given effective tax rate?

1 Answer 1


APY does not consider taxes since everyone's tax situation is different. If you want an after-tax APY for taxable investments, just multiply the APY by (1-T) where T is your marginal (not effective) tax rate.

You use marginal rate because that's how much additional tax you'll pay if you choose to invest in taxable securities.

  • Thank you for the marginal explanation. Took a bit but I understand now the "additional" tax part.
    – paulj
    Nov 3, 2022 at 14:51

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