Municipal Bond Calculator:

This free Municipal Bond Calculator will estimate a bond’s return if held to maturity and instantly check the IRS de minimis market discount rule. The tool computes years and periods to maturity and flags whether the bond’s discount is within or above the de minimis threshold, helping you understand if any market discount would be taxed as ordinary income or capital gains upon sale or maturity. Add your marginal tax rate to view the tax-equivalent yield (TEY) for quick comparisons with taxable bonds.

Calculator Details:

1. YTM (APR)

• Yield to Maturity (Nominal Annual Rate)
• The annualized interest rate (quoted in APR form) that makes the present value of all future coupon payments and principal repayment equal the current bond price.
• It assumes you hold the bond until maturity and reinvest coupons at the same rate.

👉 Think of it as the bond’s “internal rate of return” on a yearly basis, but without compounding included.

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2. YTM (Effective Annual)

• Yield to Maturity with Compounding Included
• Converts the per-period YTM into a true annual growth rate.
• This is more precise than APR because it accounts for compounding of coupon payments.

👉 If comparing with savings accounts or bank APY, this is the more accurate measure.

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3. Current Yield

• Coupon Income ÷ Price
• Simply shows how much annual coupon income the bond pays relative to your purchase price.

👉 Unlike YTM, this ignores time value and capital gains/losses at maturity. It’s a quick “income yield” snapshot.

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4. Coupon per Period

• The actual dollar amount you receive per coupon payment.

👉 For a semiannual 2.25% coupon on $100 par, this is $1.125 per period.

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5. Periods to Maturity

• Number of coupon payment intervals between settlement and maturity.
• Useful for understanding how many payments remain.

👉 Example: 25 years to maturity × 2 coupons/year = 50 periods.

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6. Years to Maturity (approx)

• Calendar years remaining until the bond matures, calculated based on the input dates.

👉 Helps compare maturity timelines across bonds.

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7. De Minimis Threshold

• The IRS threshold for determining if a bond bought at a discount has its market discount taxed as ordinary income or capital gain.

👉 A critical tax rule for municipal bonds purchased at a discount.

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8. Market Discount

• The difference between par value and purchase price.
• If the bond is bought below par, this shows how steep that discount is.

👉 Example: Par $100 – Price $58.57 = $41.43 discount.

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9. De Minimis Test Result

• The outcome of comparing Market Discount vs. De Minimis Threshold:
  • If discount > threshold → Ordinary Income (less favorable tax treatment).
  • If discount ≤ threshold → Capital Gain (more favorable tax treatment).

👉 This directly affects after-tax returns for munis held in taxable accounts.

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10. Tax-Equivalent Yield (APR)

• Adjusts YTM for your marginal tax rate to show the yield needed on a taxable bond to match the muni’s after-tax return.

👉 Lets you compare munis directly to corporates, Treasuries, or CDs on an apples-to-apples basis.

For More Information

For more information on the De Minimis Rule please visit the IRS site or consult your financial advisor.

For more content about municipal bonds, you can visit this Portfolio Literacy article.

This calculator is designed for individual investors, financial planners, and students analyzing tax-exempt municipal bonds and taxable alternatives. (Educational use only; not tax, legal, or investment advice.)