Municipal Bonds 101: Pricing, Taxes and a Georgia Mega-Project Opportunity

Hook: Worried you're leaving tax savings on the table when you buy bonds?

If you’re a busy investor, tax filer, or crypto trader with cash to park in fixed income, the difference between a taxable bond and a tax-exempt municipal (muni) bond can mean thousands of dollars over a few years. Georgia’s new $1.8 billion plan to add toll express lanes on I‑75 (announced January 2026) gives us a live example to walk through how muni issuance, pricing, and taxes interact—and how to run a simple taxable‑equivalent calculation to decide whether a muni or a taxable alternative is the smarter bet for your situation.

The big picture: Why Georgia’s $1.8B project matters to muni investors

Georgia Governor Brian Kemp proposed a $1.8 billion build for toll express lanes on I‑75 to unclog a major chokepoint in Atlanta’s southern suburbs. That scale of public infrastructure typically triggers municipal bond issuance—often revenue bonds tied to tolls or transportation-related taxes.

"When it comes to traffic congestion, we can’t let our competitors have the upper hand." — Gov. Brian Kemp (Insurance Journal, Jan 2026)

Why you should care: how this project is financed will determine whether the bonds are tax‑exempt (likely for traditional governmental revenue bonds) or taxable (often the case for certain public‑private deals or bonds not meeting federal tax rules). That tax status directly affects the yield you need from a taxable bond to match a muni’s after‑tax return.

2026 muni market trends — short summary

• Municipal yields have re‑priced since the 2022–2023 rate shock; by late 2025 many intermediate muni yields rose, but demand remains steady among tax‑sensitive investors.
• Large infrastructure projects are increasingly financed with a mix of taxable muni issuance and tax‑exempt revenue bonds. Taxable munis have become more common for public‑private partnerships and projects involving federal tax‑exempt restrictions.
• Investors are using taxable‑equivalent yield calculators more often to decide whether an in‑state tax‑exempt bond is better than a higher‑coupon taxable alternative.

Taxable vs. tax‑exempt munis — the essentials

What does "tax‑exempt" mean?

Tax‑exempt muni interest generally means the interest you receive is exempt from federal income tax and may also be exempt from state and local taxes if you live in the issuing state. That exemption can substantially raise the after‑tax return compared with a taxable bond paying a similar coupon.

When muni interest can be taxable

• Taxable munis: Some municipal bonds are taxable—often because they fund private activity, federal tax rules disallow exemption, or the issuer opts to issue taxable debt (more common for certain infrastructure deals).
• AMT exposure: Certain private activity muni interest may be subject to the Alternative Minimum Tax for some taxpayers.
• State treatment: A muni from another state is usually still exempt from federal tax but may be taxable in your state.

Bond yield basics: coupon, current yield, YTM, and yield to call

Understanding these yield terms is essential before you compare tax effects.

• Coupon rate: the fixed annual interest paid on the bond’s face value (e.g., 4%).
• Current yield: annual coupon divided by current price (coupon / price). Useful for quick comparison but ignores principal gains/losses.
• Yield to maturity (YTM): the internal rate of return if you hold the bond to maturity, factoring coupon payments and the difference between purchase price and par.
• Yield to call: if the bond can be called early, YTC computes return assuming the issuer calls at the first call date.

Simple price‑yield relationship

Bond prices and yields move inversely. If market yields rise, existing bond prices fall to equate the fixed coupon to the new yield environment. The present value formula is:

Price = Σ (Coupon / (1 + y)^t) + (Face / (1 + y)^n)

Where y is the periodic market yield (YTM). Use a financial calculator or Excel's RATE/YIELD functions for exact results.

A quick YTM approximation

If you need a back‑of‑the‑envelope estimate, use:

YTM ≈ (Annual coupon + (Face − Price) / n) / ((Face + Price) / 2)

Example: a $1,000 face bond with $40 coupon (4%), 5 years left, price $950 → YTM ≈ (40 + (1000 − 950) / 5) / ((1000 + 950)/2) = (40 + 10) / 975 = 50/975 ≈ 5.13%.

How to calculate taxable‑equivalent yield (TEY) — the simple calculator

The taxable‑equivalent yield answers: "What taxable yield would give me the same after‑tax income as this tax‑exempt muni?"

Core formulas

If the muni is federal tax‑exempt only (common for out‑of‑state munis):

TEY = tax‑exempt yield / (1 − federal_tax_rate)

If the muni is exempt from both federal and your state income tax (typical for in‑state munis):

TEY = tax‑exempt yield / ((1 − federal_tax_rate) × (1 − state_tax_rate))

Why multiply denominators? Because a taxable bond’s after‑tax return equals taxable_yield × (1 − federal) × (1 − state). Solve for taxable_yield to match the muni’s tax‑free return.

Spreadsheet / calculator setup (3 cells)

1. Cell A1: Muni yield (decimal) — e.g., 0.030 for 3.00%.
2. Cell B1: Federal marginal tax rate (decimal) — e.g., 0.32 for 32%.
3. Cell C1: State marginal tax rate (decimal) — e.g., 0.0575 for Georgia 5.75% top rate (2026).
4. Cell D1 (in‑state = TRUE): = A1 / ((1 − B1) * (1 − C1))
5. Cell D1 (out‑of‑state): = A1 / (1 − B1)

Example calculations (real numbers)

Assume a Georgia in‑state muni yielding 3.00% (0.030). Use common federal brackets for 2026 as marginal examples: 24%, 32%, and 37%. Georgia top state tax rate is about 5.75% (2026).

Investor A: 24% federal + Georgia resident (5.75%)

Denominator = (1 − 0.24) × (1 − 0.0575) = 0.76 × 0.9425 = 0.7163

TEY = 0.030 / 0.7163 = 0.0419 → 4.19%

Investor B: 32% federal + Georgia resident (5.75%)

Denominator = 0.68 × 0.9425 = 0.6409

TEY = 0.030 / 0.6409 = 0.0468 → 4.68%

Investor C: 37% federal + Georgia resident (5.75%)

Denominator = 0.63 × 0.9425 = 0.5933

TEY = 0.030 / 0.5933 = 0.0506 → 5.06%

Interpretation: If a Georgia in‑state muni yields 3.00%, an investor in the 32% federal bracket would need a taxable bond yielding about 4.68% to match the muni’s after‑tax income. If you can buy a taxable corporate bond yielding 4.8% with similar credit and duration, the taxable bond might be better for you.

Applying this to the Georgia $1.8B I‑75 project

How the state finances the lanes matters for investors:

• If Georgia issues tax‑exempt toll revenue bonds, in‑state residents will often benefit from both federal and state exemptions—plug those yields into the in‑state TEY formula.
• If the project uses a public‑private partnership or issues taxable muni bonds, interest will be taxable—then compare directly with other taxable alternatives.
• Large transportation projects are sometimes financed with a combination of federal grants, tax‑exempt revenue bonds, and taxable bonds—diversifying supply and targeting different investor buckets.

Practical tip: when an issuer uses tolls as the revenue source, look for these bond features before you buy:

• Revenue pledge or dedicated toll revenue stream
• Debt service coverage ratios and reserve fund levels
• Call structure (can the issuer call the bonds?)
• AMT status or other special tax provisions
• Credit rating from S&P, Moody’s, Fitch and any municipal rating agencies

Comparing apples to apples: beyond the TEY number

TEY is a powerful starting point, but don’t stop there. Use these practical checks:

• Credit risk: A muni rated BBB is not equivalent to an investment‑grade corporate bond rated A. Adjust your required yield for credit risk.
• Duration and interest‑rate risk: Long‑dated bonds are more sensitive to rate moves. A higher TEY may not compensate for greater duration risk.
• Liquidity: Individual munis can be thinly traded; bid/ask spreads matter. Muni funds offer liquidity but bring management fees and potential capital gains distributions.
• Call features: Callable munis may be redeemed early, capping upside if rates fall.
• Tax nuances: Confirm in the official statement whether interest is subject to AMT or state taxation for out‑of‑state holders.

Practical walkthrough: Use a simple bond calculator (step‑by‑step)

1. Find the muni’s yield to maturity (or yield to call) from the pricing screen or the official statement. If you only have the coupon and price, use the YTM approximation or Excel’s YIELD function.
2. Decide whether the bond is exempt from state tax for you (in‑state vs out‑of‑state).
3. Plug the muni yield and your marginal tax rates into the TEY formula above.
4. Compare the TEY to yields on comparable taxable alternatives (corporate bonds, CDs, Treasury yields of similar duration).
5. Adjust for credit and liquidity. If a corporate bond has similar duration and credit and yields more than the TEY, the corporate bond may be better for your situation.

Calculator checklist

• Input muni YTM (not coupon) for best accuracy.
• Use your marginal federal tax rate (include expected state surtaxes if applicable).
• If you’re subject to AMT, check whether the bond’s interest is AMT‑exempt.
• For municipal funds, TEY comparisons are approximate—funds have fees and active management.

Real‑world example: deciding on a 3% Georgia toll bond vs a 4.5% corporate bond

Scenario: You are a Georgia resident in the 32% federal bracket and face a 5.75% state rate.

• In‑state muni YTM = 3.00% → TEY (in‑state) = 4.68% (see calculation above).
• Taxable corporate bond yield = 4.50%.

Conclusion: The taxable corporate bond at 4.50% yields less than the TEY of the muni (4.68%), so the in‑state muni produces a higher after‑tax return—assuming credit risk and duration are comparable.

Advanced strategies and 2026 predictions

As we move through 2026, expect these trends to shape muni investing:

• More taxable muni issuance for big infrastructure: States are increasingly using taxable bonds for public‑private projects; that means more opportunities for investors who don’t need the tax break but want higher yields.
• Focus on ESG and transportation revenue: Climate and congestion relief projects will attract investors and may feature impact reporting—helpful for some taxable yield seekers.
• Rising demand for calculators and automation: Retail platforms will embed TEY and YTM tools into bond screens; learn to validate outputs with the simple formulas above.
• Yield curve dynamics: Watch the municipal curve versus Treasuries—muni/Treasury ratios matter when comparing risk premia across asset classes.

Checklist before you buy a muni tied to Georgia’s project

• Confirm tax status: federal exempt? state exempt for Georgia residents? AMT exposure?
• Obtain the official statement and read revenue projections, toll studies, and coverage ratios.
• Check ratings and research municipal credit analysts’ commentary.
• Match the bond’s duration to your horizon and check call dates.
• Run a TEY calculation using your marginal tax rates and compare to taxable alternatives of similar credit and maturity.
• Consider laddering or using muni funds to diversify project and issuer risk.

Tax reporting and forms — what to expect

Municipal interest is reported to you on Form 1099‑INT (or 1099‑B for some transactions). Even if interest is tax‑exempt federally, you still report it on your return in most cases—and advisory software will guide allocation of exempt interest lines. If a bond is subject to AMT, additional reporting is required. Always save the official statement and any tax disclosures.

Final actionable takeaways

• Use the TEY formula to quickly compare a muni’s tax‑free yield to taxable alternatives: TEY = muni_yield / (1 − federal) for federal only, and TEY = muni_yield / ((1 − federal)×(1 − state)) for in‑state munis.
• For Georgia’s $1.8B I‑75 project, confirm whether the bonds will be tax‑exempt revenue bonds or taxable issues—this changes the analysis materially.
• Don’t rely on TEY alone—adjust for credit risk, duration, liquidity, and call features.
• Run scenarios using your actual marginal tax rates, and if your situation is complex (AMT, high net worth, multi‑state income), consult a tax pro.

Call to action

If you want to decide faster: use our free muni vs taxable bond calculator to plug in yield, federal rate, and state rate—then run side‑by‑side comparisons. Or, if you’re evaluating the Georgia I‑75 bonds specifically, download the official statement once available and request a credit briefing from your adviser. Need help running the numbers? Contact a tax‑sensitive fixed‑income specialist today to convert TEY into an investment action plan that fits your tax profile and time horizon.

Related Reading

• How Running Brands Should Use Social Search Signals to Sell Shoes
• Precision Portioning & Adaptive Meal Systems: Advanced Clinic Strategies for 2026
• Fleet Managers: Should You Buy Cheaper E-Bikes or Scale With Shared Bike Providers?
• United’s 14-Route Summer Expansion: Best New Getaways for UK Travellers
• Localize Faster: How Desktop AI Assistants Can Speed Up Translator Throughput Without Sacrificing Accuracy