Best Tax-Free Municipal Bonds

By Lyle Daly – Updated Oct 17, 2025 at 4:29 PM | Fact-checked by Frank Bass

Key Points

Tax-free municipal bonds are low-risk investments exempt from federal taxes, and possibly state and local taxes, as well.
Investing in munis through bond funds allows diversified, time-efficient portfolios.
Before investing, assess if tax savings from munis will outweigh lower returns.

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A person writing Municipal Bonds in a notebook. — Image source: Getty Images.

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NYSEMKT: VTEB

Vanguard Municipal Bond Funds - Vanguard Tax-Exempt Bond ETF

Today's Change

(0.18%) $0.09

Current Price

$50.39

Key Data Points

Market Cap

$0B

Day's Range

$50.30 - $50.40

52wk Range

$47.02 - $51.09

Volume

8.1M

Avg Vol

Gross Margin

0.00%

Dividend Yield

N/A

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The Vanguard Tax-Exempt Bond ETF (VTEB +0.18%) is an intermediate-term bond fund that invests in more than 9,500 bonds. Like just about all Vanguard tax-free municipal bond funds, the expense ratio is extremely low -- the cheapest on this list at 0.03%. The 30-day SEC yield was 3.5% in mid-October 2025.

For a municipal bond fund, this Vanguard ETF has a fairly high yield. It costs hardly anything in fees, and the large number of bonds keeps risk to a minimum.

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General Obligation Bonds

General obligation bonds, or GO bonds, are municipal bonds that aren’t directly connected to a specific revenue-producing project.

2. iShares National Muni Bond ETF

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NYSEMKT: MUB

iShares Trust - iShares National Muni Bond ETF

Today's Change

(0.22%) $0.24

Current Price

$107.23

Key Data Points

Market Cap

$0B

Day's Range

$107.08 - $107.25

52wk Range

$100.29 - $108.60

Volume

4.5M

Avg Vol

Gross Margin

0.00%

Dividend Yield

N/A

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The iShares National Muni Bond ETF (MUB +0.22%) aims to track an index of investment-grade U.S. municipal bonds. It holds more than 5,500 bonds. Some of its top holdings are bonds issued in California, New York, Massachusetts, and New Jersey.

This bond ETF had a 30-day SEC yield of 3.35% in mid-October 2025, and iShares charges an expense ratio of 0.05%. The yield and annual fee are both highly competitive, as is the risk profile -- this fund invests primarily in AA and AAA bonds.

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3. Vanguard High-Yield Tax-Exempt Fund

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NASDAQMUTFUND: VWAHX

Vanguard Municipal Bond Funds - Vanguard High-Yield Tax-Exempt Fund

Today's Change

(-0.19%) $-0.02

Current Price

$10.67

Key Data Points

Market Cap

$0B

Day's Range

$10.67 - $10.67

52wk Range

$10.67 - $10.67

Volume

Avg Vol

Gross Margin

0.00%

Dividend Yield

N/A

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NYSEMKT: CMF

iShares Trust - iShares California Muni Bond ETF

Today's Change

(0.19%) $0.11

Current Price

$57.41

Key Data Points

Market Cap

$0B

Day's Range

$57.38 - $57.42

52wk Range

$53.61 - $58.14

Volume

359K

Avg Vol

Gross Margin

0.00%

Dividend Yield

N/A

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If you live in California and have a high marginal tax rate, it's a good idea to invest in tax-free municipal bonds issued there so you can avoid state taxes. The iShares California Muni Bond ETF (CMF +0.19%) fits the bill. It invests in investment-grade municipal bonds issued in California, holds more than 1,200 munis, and charges a 0.08% expense ratio.

This California bond ETF had a 30-day SEC yield of 3.07% in mid-October 2025. Because California has some of the highest income tax rates in the U.S., this fund's after-tax yield could be better than what you'd get from other bond funds.

5. Vanguard New York Long-Term Tax-Exempt Fund Investor Shares

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NASDAQMUTFUND: VNYTX

Vanguard New York Tax-Exempt Funds - Vanguard New York Long-Term Tax-Exempt Fund

Today's Change

(-0.28%) $-0.03

Current Price

$10.87

Key Data Points

Market Cap

$0B

Day's Range

$10.87 - $10.87

52wk Range

$10.87 - $10.87

Volume

Avg Vol

Gross Margin

0.00%

Dividend Yield

N/A

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New York is another state with high income taxes. If you live there, check out the Vanguard New York Long-Term Tax-Exempt Fund Investor Shares (VNYTX -0.28%). This fund invests in high-quality municipal bonds issued by New York state and local governments.

There are more than 1,500 bonds in this ETF, which charges a 0.14% expense ratio. The 30-day SEC yield was 3.77% in mid-October 2025. The combination of low fees and a solid yield makes this fund the top option for New York residents.

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Revenue Bonds

A type of municipal bond that is issued by a state or local entity to fund a specific project, such as a toll road, airport, or sewer facility.

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NYSEMKT: PZA

Invesco Exchange-Traded Fund Trust II - Invesco National AMT-Free Municipal Bond ETF

Today's Change

(0.34%) $0.08

Current Price

$23.32

Key Data Points

Market Cap

$0B

Day's Range

$23.27 - $23.33

52wk Range

$21.49 - $24.34

Volume

665K

Avg Vol

Gross Margin

0.00%

Dividend Yield

N/A

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Some high-income investors need to pay the alternative minimum tax (AMT). The Invesco National AMT-Free Municipal Bond ETF (PZA +0.34%) invests specifically in municipal bonds that are exempt from the AMT.

This fund holds more than 5,000 bonds, and it's notable for investing in long-term bonds with at least 15 years remaining until maturity. Bonds with longer terms generally pay more, which was reflected in this Invesco fund's 30-day SEC yield of 3.9% in mid-October 2025. The expense ratio is 0.28%.

7. iShares Short-Term National Muni Bond ETF

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NYSEMKT: SUB

iShares Trust - iShares Short-Term National Muni Bond ETF

Today's Change

(0.11%) $0.12

Current Price

$106.34

Key Data Points

Market Cap

$0B

Day's Range

$106.27 - $106.35

52wk Range

$104.02 - $107.32

Volume

501K

Avg Vol

Gross Margin

0.00%

Dividend Yield

N/A

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The iShares Short-Term National Muni Bond ETF (SUB +0.11%) provides exposure to short-term munis, meaning those with one month to five years until maturity. An advantage of short-term bonds is that they carry less interest rate risk. If rates rise, the bondholder isn't locked into a lower rate for long.

The expense ratio for this iShares bond ETF is a low 0.07%, and it holds more than 2,500 bonds. The 30-day SEC yield was 2.38% in mid-October 2025. Short-term bonds tend to have lower rates, which is the tradeoff for less interest rate risk.

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