Comments on: Tax Equivalent Yield Calculator

By: Eric N.

Eric N. — Thu, 30 Oct 2008 23:16:10 +0000

^Monica, I’m on a mac also and the windows are normal sized for me. Maybe try Firefox instead of Safari?

By: savings

savings — Wed, 29 Oct 2008 12:16:53 +0000

Love the calculator, with one request: could you increase the size of the little windows? On my mac, I can only view about one digit at a time. It may be a Mac/PC text size thingy. Now if you could only help me know how much tax-free money I can earn without triggering AMT, I’d be eternally greatful.

Monica

By: Brandon

Brandon — Wed, 29 Oct 2008 11:53:49 +0000

It might be useful if the calculator could go both ways.

By: fivecentnickel.com

fivecentnickel.com — Tue, 28 Oct 2008 22:35:06 +0000

Actually, marginal rate is the right thing to use, isn’t it? You’re effectively talking about the last dollars taxed. For simplicity, let’s say that you have $400k in what would otherwise be taxable income (that puts you in the 35% marginal bracket). But… Lo and behold you discover that (say) $10k of your income is actually exempt from federal income taxes. That saves you a full 35% of the $10k, not an amount equal to your effective tax rate. Of course, if the exemption of this income causes you to crossover into the next bracket down, it gets more complex (basically a weighted average of the marginal rates).

By: jim

jim — Tue, 28 Oct 2008 20:59:30 +0000

I use the number that the person supplies, if they enter in their effective tax rate then it will calculate that it based on that number.

Effective tax rate is difficult to determine given the different circumstances (deductions, credits, etc), so I didn’t go down that path. Ultimately, if you figure you’re deciding where your “next dollar” goes (or rather, how your next dollar will be earned), then marginal rate is an appropriate measure.

Thanks for the feedback!

By: Mr. ToughMoneyLove

Mr. ToughMoneyLove — Tue, 28 Oct 2008 20:45:36 +0000

It appears that you are using the marginal tax rate in your calculator (although I cannot see your algorithm to confirm). To provide a precise tax equivalent yield calculatio, I think you really need to use the effective tax rate, not the marginal rate. That would require the user to input their income rather than the marginal rate or to use a tax table. Your calculator would need to do the rest.