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Money Market Fund Dividend Income Information for Tax Year 2024 from Vanguard

RichardW
  |     |   787 posts since 2019

A portion of money market fund dividends derived from U.S. government obligations may be exempt from state and local income taxes. The link included below provides information regarding the percentage of ordinary dividends from U.S. government obligations for funds from Vanguard in tax year 2024. Since several DA readers have money market funds with Vanguard, this information may be useful in the preparation of their tax returns for tax year 2024. Similar information for Schwab is typically available during the last week of January, while Fidelity information is typically posted in mid-February.

VUSXX (Vanguard Treasury Money Market Fund) had 100.00% of its ordinary dividends from U.S. government obligations in tax year 2024. Vanguard’s normal default settlement account VMFXX (Vanguard Federal Money Market Fund) had 59.87% of its ordinary dividends from U.S. government obligations in tax year 2024.

Note that California, Connecticut, and New York have threshold requirements which require that 50% of the fund’s assets at each quarter-end within the tax year consist of U.S. government obligations. If the fund does not meet the 50% threshold requirement, then none of the dividends will be state tax exempt. Whether a specific fund has met the threshold requirement for tax year 2024 is indicated in the information available from the link provided below.

Money market funds don’t have FDIC coverage, but they do offer a useful alternative to savings accounts for liquidity. Although money market funds are considered extremely low-risk investments, some may include slightly more risk than others. Money market funds which invest predominantly in Treasuries are generally considered to be the safest.

https://investor.vanguard.com/content/dam/retail/publicsite/en/documents/taxes/USGO_012025.pdf

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13


49ers
  |     |   360 posts since 2025
really good info, is there a fidelity equivalent - oops i' think i'm over paying my state taxes!
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txFish1
  |     |   472 posts since 2023
49ers
Fidelity has SPAXX which is a government money market and FDLXX which is a Treasury only money market and last I checked they were paying around 4.10% apy give or take a few basis points.
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2
Tegan
  |     |   26 posts since 2019
I've never taken advantage of this. Will the percentage be listed on the 1099-Div? TIA
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1
49ers
  |     |   360 posts since 2025
from what i understand i think you have to do a manual calculation based on the fund's make up and self report that portion is not state taxable. it's not listed on the 1099...what is confusing me is - is it treasury only that is deductible or all us govt obligations

for example- spaxx-what % is deductible from state taxes? assuming youre not in CA/NY/CT- 29.69%?

U.S. Treasury Bills 24.52%
 U.S. Treasury Coupons 3.76% 
U.S. Treasury Strips 0.00% 
U.S. Treasury Inflation-Protected Securities 1.41% 
Agency Fixed-Rate Securities 5.55% 
Agency Floating-Rate Securities 20.69% 
U.S. Government Repurchase Agreements 46.21% 
Other Money Market Investments 0.00% Net Other Assets -2.1
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Tegan
  |     |   26 posts since 2019
In Iowa it says all dividends attributable to direct federal securities can be deducted. -- So it sounds like anything that's a govt obligation, but also says you need a statement from the mutual fund.

https://olt.livehelpnow.net/17366/kb/article/59956/iowa-state-exempt-dividends
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49ers
  |     |   360 posts since 2025
from what ive read it's basically treasury only obligations...agency/repurchase agreements is not us govt . interest...
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RWK
  |     |   91 posts since 2024
Taking a quick glance and rounding up it looks like about 30%-
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1
RWK
  |     |   91 posts since 2024
US treasuries, coupons and tips are state tax exempt 
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RichardW
  |     |   787 posts since 2019
At the bottom of page 1 in the Vanguard link listed in my original post it states:

“Investments in U.S. government obligations may include the following: Federal Farm Credit Banks, Federal Home Loan Banks, the Student Loan Marketing Association, the Tennessee Valley Authority, the U.S. Treasury Department (bonds, notes, bills, certificates, and savings bonds), and certain other U.S. government obligations. GNMA, FNMA, Freddie Mac, repurchase agreements (including those that involve U.S. government obligations), and certain other securities are generally subject to state and local taxes.”
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RichardW
  |     |   787 posts since 2019
The percentage of ordinary dividends from U.S. government obligations during tax year 2024 for money market funds such as Fidelity’s SPAXX, is not based on the fund’s portfolio composition solely on the last day of the year (12/31/2024) such as the percentages listed earlier in a comment by 49ers. They are based on an average of the fund’s portfolio composition over the entire tax year, in this case from 1/1/2024 until 12/31/2024. The % for 12/31/2024 could be close to the average % for the entire tax year, then again it might not.

The average % information for tax year 2024 from Fidelity has not yet been released. It is typically posted by Fidelity in mid-February. When it is posted it should be available here: https://www.fidelity.com/tax-information/fidelity-mutual-fund-tax-information
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