Congratulations, you cleared $400,000 this year. Now meet your silent partner: the IRS, who is taking 35% of every dollar you earn above the top-bracket threshold, plus a slice of your interest income, your short-term gains, and your non-qualified dividends. At your income level, where you park your money matters almost as much as what you earn on it.
Three exchange-traded funds stand out for high-bracket investors building a taxable brokerage account: the iShares National Muni Bond ETF (NYSEARCA:MUB), the Vanguard Tax-Exempt Bond ETF (NYSEARCA:VTEB), and the Vanguard S&P 500 ETF (NYSEARCA:VOO). Together they give you tax-free income, tax-free income at a rock-bottom cost, and tax-efficient equity growth, in that order.
The Tax Math That Should Keep You Up at Night
For tax year 2026, the top federal rate of 37% kicks in once a single filer crosses $640,600 in taxable income, or $768,700 for married couples filing jointly. Even if you sit a bracket lower, the 35% layer starts at $256,225 single. A 10-year Treasury currently pays roughly 4.40%. After federal tax, you keep barely more than two-thirds of that. The pitch for the funds below is brutally simple: reduce the interest income flowing to the federal government.
MUB: The Anchor of a Tax-Aware Bond Sleeve
MUB is the largest national municipal bond ETF on the market. It holds investment-grade munis issued by states, cities, school districts, and authorities across the country, tracking the ICE AMT-Free US National Municipal Index. Income from those bonds is generally exempt from federal tax, which is exactly the leverage point a 35% earner needs.
The expense ratio is 0.05%. That means $9,995 of every $10,000 you invest is actually working for you, with $5 going to BlackRock. MUB pays monthly, and 2026 distributions have clustered tightly between $0.279049 and $0.29222 per share, a predictable income stream you can pencil into your budget. The fund trades at $107.71 and has returned 6.59% over the past year on a total-return basis, with a 1.89% gain year to date.
VTEB: Vanguard’s Cheaper Mirror Image
VTEB does the same job from the other side of the index aisle. It is Vanguard’s broad national tax-exempt bond ETF, holding thousands of investment-grade munis and distributing federally tax-free interest monthly. The fund changes hands near $50.64 and has actually edged MUB on total return, up 6.96% over the past year and 2.12% year to date.
Why own both? Diversification of index methodology and issuer weighting, and the option to harvest tax losses by swapping between two near-identical funds without triggering a wash sale. If you are deploying a six-figure bond allocation, splitting it across MUB and VTEB is a cleaner setup than putting it all in one ticker.
VOO: Tax-Efficient Growth You Already Wanted
Munis address the income side. VOO addresses the wealth-building side. The fund tracks the S&P 500, charges a published expense ratio of 0.03%, and is structurally one of the most tax-efficient vehicles in retail finance. The ETF wrapper lets Vanguard wash out embedded capital gains through in-kind redemptions, so unlike an actively managed fund, VOO rarely pumps year-end capital gains distributions into your 1099. Its dividends are largely qualified, which means they are taxed at long-term capital gains rates, not your ordinary 35%.
Performance has been the reward for that patience. VOO trades at $681.01, up 21.9% over the past year and 316.86% over the past decade.
The Trade-Off You Need to Accept
None of this is free. Munis carry interest-rate risk and credit risk, and their tax-equivalent yields look less compelling if your state already exempts Treasury interest or if you drop into a lower bracket. VOO is fully exposed to the S&P 500, and the same structure that limits capital gains distributions does nothing to limit drawdowns. At 37%, the cost of ignoring tax location is far higher than the cost of accepting the tax, market, and duration risks these three funds carry. For investors who structure a taxable account around these vehicles, the IRS becomes a smaller partner in the year.
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