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Taxes On Treasuries (Individual Vs. Bond Fund)

LinusP
  |     |   21 posts since 2018

I live in California, and understand that I can lower my state tax burden by moving from CDs to Treasuries. Is this only true for individual treasuries owned by me, or is it also true for bond funds that hold Treasuries? Does it matter if the fund holds Treasuries exclusively, or other bonds as well? Not sure it matters, but I'm already a Vanguard customer and am considering VFISX. Thanks for any help in understanding this.

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alan1
  |     |   877 posts since 2015
1. It's true for bond funds as well.
2. It does matter if the fund holds only Treasuries, or whether it gets income from other assets as well.
3.For 2017 info re Vanguard funds, including VFISX, go to https://personal.vanguard.com/pdf/USGO_022018.pdf (Most, but not all, of the 2017 income from VFISX, is exempt from state and local income taxes.)
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LinusP
  |     |   21 posts since 2018
Very helpful...thanks!
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RickZ
  |     |   218 posts since 2010
Vanguard also has two California-specific bond funds (an intermediate-term and a long-term) that invest in California municipal bonds and that are exempt from Federal and California taxes. Just type in California in the Vanguard search engine.
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LinusP
  |     |   21 posts since 2018
I'm not really in the market for municipal bonds at the moment, but still good to know - thanks.
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Bozo
  |     |   1,375 posts since 2011
Check out FUSGX. The portfolio consists of Government securities (mostly mortgage-backed). Fanny Mae and such. Might be what you are looking for. Run it by your tax advisor, but our Trust held it for years and years, and never paid a dime in state income tax. Mind you, we held it for many years in a falling-rate environment (I sold a couple of years back), so you'll need to be patient.

At first blush, the chart seems ugly. Just remember the NAV is impacted by the distributions, so it's not as bad as it looks. The ER is pretty high, and that was always a concern to me. As I said, I bailed when the bailing was good, a couple of years back.
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