The Benefit of Municipal Investing

The investments shown are hypothetical and are based on federal income tax rates. This chart is for illustration only and does not predict or guarantee the performance of any Wells Fargo Advantage Fund. Income may be subject to state and local taxes, and, for certain investors, the Alternative Minimum Tax.

How do you determine whether municipal investing is right for you?

The decision between whether a taxable or tax-exempt bond or bond fund is right for you can be made in part by comparing the yields. Since the yields of municipal investments and your tax rate may change over time, you should continually reevaluate the benefits of municipal investments in your portfolio. To discover how a taxable and tax-free yield compare, use the following formula:

Take a look at the following hypothetical example

The calculator below allows you to convert a federally tax-exempt yield¹ into a taxable equivalent – therefore you can compare apples to apples.

The benefit of municipal investing calculator

Federally tax-exempt yield %

Federal income tax rate Select 10% 15% 25% 28% 33% 35%

 

2010 Federal Income Tax Brackets and Rates

Single Return	Married Filing Jointly Return	Federal Tax Rate
$0 - $8,375	$0 - $16,750	10%
$8,376 - $34,000	$16,751 - $68,000	15%
$34,001 - $82,400	$68,001 - $137,300	25%
$82,401 - $171,850	$137,301 - $209,250	28%
$171,851 - $373,650	$209,251 - $373,650	33%
Over $373,650	Over $373,650	35%

Taxable equivalent yield %

 

¹A portion of the Fund's income may be subject to federal, state and/or local income taxes or the alternative minimum tax (AMT). Any capital gains distributions may be taxable.

Any tax or legal information in this website is merely a summary of our understanding and interpretations of some of the current income tax regulations and is not exhaustive. Investors should consult their tax advisor or legal counsel for advice and information concerning their particular situation. Wells Fargo Funds Management, LLC, Wells Fargo Funds Distributor, LLC, nor any of their representatives may give legal or tax advice.

You keep more of what you earn. For example, you have a $10,000 investment that earns 5% annually. If it is invested in a tax-free investment, you keep all $500 in earnings. In a taxable investment, at a 25% tax rate, you keep $375, paying $125 in taxes. At a 28% tax rate, you keep $360, paying $140 in taxes. At a 33% tax rate, you keep $335, paying $165 in taxes. At a 35% tax rate, you keep $325, paying $175 in taxes.

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