Are Treasury money market funds exempt from state taxes?
Treasuries are exempt from state income taxes, whereas CDs are subject to both federal and state income taxes. As a result, investors who are choosing between the two options should start with what account type they are investing in, and then consider what their state tax rate is.
Bonds typically pay a fixed amount of interest (usually paid twice per year). Interest from corporate bonds and U.S. Treasury bonds interest is typically taxable at the federal level. U.S. Treasuries are exempt from state and local income taxes.
If you had $1,000 in dividends reported to your 1099-DIV from SNSXX, 99.61% of this may be exempt at the state and local levels. Therefore, $996.10 may be claimed as tax-exempt when filing state taxes.
It is exempt from state and local taxes, but not federal income taxes. Repurchase agreements, as investments held by SPAXX and FZSXX are not exempt from state and local taxes. Therefore, SPAXX and FZSXX and other money market funds are also not exempt from state and local taxes.
Income earned from money market fund interest is taxed as regular income, up to 37% depending on the investor's tax bracket. While some local and state taxes offer breaks on income earned from U.S. Treasury bonds, federal income tax still applies.
The Adviser normally invests at least 99.5% of the fund's total assets in cash and U.S. Treasury securities. Potentially entering into reverse repurchase agreements. Normally investing in securities whose interest is exempt from state and local income taxes.
Money-market funds might pay a little less, but they are the rare mutual fund designed so that their share price almost never changes. And T-bills' value can fluctuate unless you hold them to maturity. Treasury securities are essentially interest-bearing IOUs issued by the U.S. government to raise funds.
- Report interest each year and pay taxes on it annually.
- Defer reporting interest until you redeem the bonds or give up ownership of the bond and it's reissued or the bond is no longer earning interest because it's matured.
Then there are the tax exemptions. If issued by a government entity, the interest generated by a zero-coupon bond is often exempt from federal income tax, and usually from state and local income taxes too. Various local municipalities are significant issuers of zero-coupon bonds.
- Vanguard California Municipal Money Market Fund. ...
- Vanguard New York Municipal Money Market Fund. ...
- Schwab AMT Tax-Free Money Fund. ...
- DREYFUS TAX EXEMPT CASH MANAGEMENT FUND. ...
- Schwab Municipal Money Fund. ...
- Schwab New York Municipal Money Fund. ...
- Vanguard Municipal Money Market Fund. ...
- TAX-FREE MONEY MARKET FUND. BNTXX | Fund | Investor.
What is the difference between SWVXX and Snvxx?
Unlike SWVXX, SNVXX is classified as a government money market fund. Legally, this means it must invest 99.5% or more of its assets in government-issued securities like Treasurys or agency debt, or repurchase agreements collateralized by them.
| Fund Name | Ticker | 7-day yield1 |
|---|---|---|
| Schwab Value Advantage Money Fund® - Investor Shares4 | SWVXX | 5.16% |
| Schwab Value Advantage Money Fund® - Ultra Shares4 | SNAXX | 5.31% |
| Schwab Government Money Fund - Investor Shares | SNVXX | 5.03% |
| Schwab Government Money Fund - Ultra Shares | SGUXX | 5.18% |
Currently, SPAXX is 25% actual Treasuries and 50% re-purchase agreements. Only the Treasury part will be State Exempt.
Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not a bank account and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The 7-Day yield is the average income return over the previous seven days, assuming the rate stays the same for one year and that dividends are reinvested. It is the Fund's total income net of expenses, divided by the total number of outstanding shares and includes any applicable waiver or reimbursem*nt.
The fund is designed for investors with a low tolerance for risk; however, the fund's performance could be hurt by: Income risk: The chance that the fund's income will decline because of falling interest rates.
Low Risk and Short Duration
As stated above, money market funds are often considered less risky than their stock and bond counterparts. That's because these types of funds typically invest in low-risk vehicles such as certificates of deposit (CDs), Treasury bills (T-Bills), and short-term commercial paper.
The income earned from the Treasury Money Market Fund is fully taxable at the federal level. A percentage of the income is exempt from state income tax. That percentage varies from year to year.
FMOXX – Fidelity Tax-Exempt Money Market Fund Stock Price | Morningstar.
Interest income from securities issued by U.S. territories and possessions is exempt from federal, state, and local income tax in all 50 states. For this reason, you should add the percentages listed for any U.S. territories or possessions to the percentage for your given state.
Which money market fund is not taxable?
Municipal (sometimes known as tax-exempt)
Normally at least 80% of the fund's assets are invested in municipal securities whose interest is exempt from federal and state personal income taxes.
Both types of government money market funds are considered extremely safe but only a Treasury fund invests purely in securities backed by the full faith and credit of the U.S. Government. Municipal money market funds invest in municipal bonds issued by municipalities and municipal agencies.
While Treasurys boast higher rates than CDs, you can still score a generous annual percentage yield (APY) on a CD by shopping around. Typically, online banks offer higher interest rates than brick-and-mortar ones. Some of the best CDs have APYs that top 5%.
In the realm of mutual-fund-like investments, money market funds are characterized as low-risk, low-return investments. Many investors prefer to park substantial amounts of cash in such funds for the short term. However, money market funds are not suitable for long term investment goals, like retirement planning.
Interest income from Treasury bills, notes and bonds - This interest is subject to federal income tax, but is exempt from all state and local income taxes.
