High Earners Are Skipping Treasuries for These 3 Tax Free Muni ETFs Yielding Over 4 Percent After Tax

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David Beren

Tue, June 2, 2026 astatine 9:38 AM CDT 6 min read

Quick Read

iShares National Muni Bond ETF (MUB) yields 3.5% tax-free with investment-grade recognition prime and lowest expenses, portion VanEck High Yield Muni ETF (HYD) yields 4.32% done below-investment-grade baccy and Puerto Rico bonds offering 7.6% tax-equivalent returns, and SPDR Nuveen Bloomberg High Yield Muni ETF (HYMB) yields 4.55% with akin vulnerability but little attraction risk.
Top-bracket earners facing 40.8% combined national taxation rates connected Treasury yields find municipal bonds delivering 5.9% to 7.6% tax-equivalent yields acold much charismatic than Treasuries’ 2.6% after-tax returns.
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The 10-year Treasury yields 4.43%, which sounds competitory until a precocious earner runs it done the taxation screen. At the apical national marginal complaint of 37% positive the 3.8% nett concern income tax, the after-tax output collapses to astir 2.6%. Add authorities income taxation successful California, New York, oregon New Jersey, and the existent take-home falls further. Three municipal enslaved ETFs are absorbing flows that utilized to caput into Treasuries: the iShares National Muni Bond ETF (NYSEARCA:MUB), the VanEck High Yield Muni ETF (NYSEARCA:HYD), and the SPDR Nuveen Bloomberg High Yield Municipal Bond ETF (NYSEARCA:HYMB).

Each money delivers tax-equivalent yields supra 4% for top-bracket investors, and the 2 high-yield options output implicit 4% tax-free. The question is which money matches the investor's tolerance for recognition and duration risk.

Why the Tax Math Matters More Than the Headline Yield

For taxation twelvemonth 2026, the apical national bracket is 37% kicks successful supra $640,600 for azygous filers and $768,700 for joined couples filing jointly. The 3.8% NIIT stacks connected apical for concern income, producing a combined national complaint adjacent 40.8%. A payer successful California oregon New York City pays an further 10% oregon more, making effectual rates supra 50% regular successful coastal metros.

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Municipal enslaved involvement is exempt from national income tax, and in-state munis are typically exempt from authorities tax. At a 40.8% combined national rate, a 3.5% tax-free output becomes a 5.9% taxable equivalent, portion a 4.5% muni output equates to 7.6%, and a 4.4% output works retired adjacent 7.4%. Treasuries cannot lucifer those numbers today.

SECURE 2.0 near munis untouched, but the Tax Cuts and Jobs Act model was extended and modified nether the One, Big, Beautiful Bill, keeping the 37% apical complaint successful spot for 2026. The tax-arbitrage lawsuit for munis rests connected that bracket staying intact.

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