iShares Muni Bond ETF Offers Tax Advantages for California Residents

The iShares California Muni Bond ETF (CMF) offers a 3.52% 30-day SEC yield that is generally exempt from federal income tax and California state and local personal income taxes for California residents. This yield is significantly different from the Vanguard Total Bond Market ETF (BND), which carries a 4.84% 30-day SEC yield but remains subject to taxation in a taxable account.

The tax efficiency of CMF, which is estimated to equate to a 7.68% yield using the highest federal and California individual income tax rates, offers a distinct advantage over BND. Over the trailing year, BND returned 3.69% before taxes but only 2.04% after taxes on distributions.