{"id":727,"date":"2016-10-20T12:43:50","date_gmt":"2016-10-20T12:43:50","guid":{"rendered":"http:\/\/onlyfordentists.com\/blog\/?p=727"},"modified":"2016-10-20T12:45:00","modified_gmt":"2016-10-20T12:45:00","slug":"how-to-decide-between-taxable-and-tax-exempt-investments","status":"publish","type":"post","link":"https:\/\/onlyfordentists.com\/blog\/2016\/10\/how-to-decide-between-taxable-and-tax-exempt-investments\/","title":{"rendered":"How to Decide Between Taxable and Tax Exempt Investments"},"content":{"rendered":"<p><a href=\"http:\/\/onlyfordentists.com\/blog\/wp-content\/uploads\/2016\/10\/iStock_000002942341_Large-4.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-medium wp-image-729\" src=\"http:\/\/onlyfordentists.com\/blog\/wp-content\/uploads\/2016\/10\/iStock_000002942341_Large-4-300x199.jpg\" alt=\"istock_000002942341_large-4\" width=\"300\" height=\"199\" srcset=\"https:\/\/onlyfordentists.com\/blog\/wp-content\/uploads\/2016\/10\/iStock_000002942341_Large-4-300x199.jpg 300w, https:\/\/onlyfordentists.com\/blog\/wp-content\/uploads\/2016\/10\/iStock_000002942341_Large-4-1024x681.jpg 1024w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a>Suppose you are considering two investments. One is tax-exempt and the other is taxable. Which should you choose?<\/p>\n<p><strong>Make the Comparison<\/strong><\/p>\n<p>The first thing you should determine is the taxable investment\u2019s <em>after-tax <\/em>yield. If two investments are offering the same rate of return and are of equal quality, you\u2019re better off with the tax-exempt investment. However, taxable investments generally pay a higher rate of return. Thus, you can\u2019t make a fair comparison without considering the taxes you would pay in your tax bracket on the income from the taxable investment.<\/p>\n<p>Here is a simple three-step formula for comparing your after-tax return on a taxable investment with the return on a tax-exempt investment.<\/p>\n<p><strong>Step 1<\/strong><strong>: <\/strong>Subtract your marginal tax rate from 100%. (For example, in a 28% tax bracket, 100% &#8211; 28% = 72%.)<\/p>\n<p><strong>Step 2<\/strong><strong>: <\/strong>Multiply the rate of return on the taxable investment by the resulting percentage. (6% hypothetical return \u00b4 72% = 4.32% after-tax return.)<\/p>\n<p><strong>Step 3<\/strong><strong>:<\/strong> Compare this rate with the rate of return on the tax-exempt investment.<\/p>\n<p>In our example, the investor in a 28% marginal tax bracket would choose the taxable investment paying 6% over a tax-exempt paying less than 4.32%. A tax-exempt investment paying more than 4.32% would be the better deal, assuming it were of equal quality.<\/p>\n<p>Give us a call today, so we can help you determine the right course of action for you.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Suppose you are considering two investments. One is tax-exempt and the other is taxable. Which should you choose? Make the Comparison The first thing you should determine is the taxable investment\u2019s after-tax yield. If two investments are offering the same rate of return and are of equal quality, you\u2019re better off with the tax-exempt investment. [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[4],"tags":[],"class_list":{"0":"post-727","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-taxes","7":"entry","8":"has-post-thumbnail"},"_links":{"self":[{"href":"https:\/\/onlyfordentists.com\/blog\/wp-json\/wp\/v2\/posts\/727","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/onlyfordentists.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/onlyfordentists.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/onlyfordentists.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/onlyfordentists.com\/blog\/wp-json\/wp\/v2\/comments?post=727"}],"version-history":[{"count":2,"href":"https:\/\/onlyfordentists.com\/blog\/wp-json\/wp\/v2\/posts\/727\/revisions"}],"predecessor-version":[{"id":730,"href":"https:\/\/onlyfordentists.com\/blog\/wp-json\/wp\/v2\/posts\/727\/revisions\/730"}],"wp:attachment":[{"href":"https:\/\/onlyfordentists.com\/blog\/wp-json\/wp\/v2\/media?parent=727"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/onlyfordentists.com\/blog\/wp-json\/wp\/v2\/categories?post=727"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/onlyfordentists.com\/blog\/wp-json\/wp\/v2\/tags?post=727"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}