Tax Playbook · Investment tax wins
Deferred beats muni beats taxable
Munis pay less but you keep it all: 3.5% muni means 3.5% in your pocket. Taxable bonds pay more — 4.8% — but if you pay 33% tax every year, you keep only about 3.2%. If instead you earn that same 4.8% but pay a 20% capital gains tax just once after 10 years, you keep about 4.0% a year (about 4.2% over 20 years). Lesson: when and how you are taxed can beat the headline yield — a taxable bond would need 6% to match the deferred 4.0%.
Good for: Investors in taxable accounts who reinvest bond income and face high tax rates.
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Recent articles & guides
- Morningstar: How to Use Municipal-Bond Funds in a Portfolio (tax-equivalent yield math)
- Morningstar/MarketWatch: A 10% Risk-Free Yield? For Some, Yes (Sep 2026, TEY examples)
- Schwab Asset Management: Tax-Free Municipal Bonds? Not Always — 7 Muni Tax Traps (2026)
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Educational summary, not tax advice. Limits and rules change — confirm current law with your tax adviser.