Which money market funds are tax exempt?
Municipal money market funds invest primarily in short-term, municipal money market securities issued by states, local governments, and other municipal agencies. They pay interest that is generally exempt from federal income tax.
Income generated by a money market fund can be either taxable or tax-exempt, depending on the types of securities in which the fund invests. U.S. Securities and Exchange Commission (SEC) regulations define 3 categories of money market funds based on investments of the fund—government, prime, and municipal.
FMOXX - Fidelity ® Tax-Exempt Money Market Fund | Fidelity Investments.
The the top three tax-exempt money market funds ranked by 1-year total return are the Fidelity SAI Municipal Money Market (FMQXX), Vanguard Municipal Money Market Inv (VMSXX), and Invesco Treasurer's Ser Tr Prem TxEx Ins (PEIXX).
The earnings from money market funds can come from interest income or capital gains, so they're taxed the same way as other investment income.
Schwab AMT Tax-Free Money Fund's and Schwab Municipal Money Fund's dividends typically are exempt from federal income tax, but are subject to state and local personal income taxes.
Money market funds are divided into two categories: taxable and tax-free. If you're buying a taxable fund, any returns from the fund are generally subject to regular state and federal taxes.
Stability & safety
While not insured by the FDIC, the funds are required by federal regulations to invest in short-maturity, low-risk investments, making them less prone to market fluctuations than many other types of investments.
Fidelity Government Money Market Fund (SPAXX), a taxable money market mutual fund investing in U.S. Government Agency and Treasury debt, and related repurchase agreements.
Is There Such a Thing as a Tax-Free Investment? The simple answer to this question is “yes.” There are two main types: (1) municipal bonds and municipal bond mutual funds and (2) tax-free money market funds.
What is better than a money market fund?
High-yield savings accounts
These accounts are federally insured through either the FDIC or the NCUA and are more common with online banks or credit unions as they generally have a lower cost structure than brick-and-mortar institutions.
- Your Money Could Earn More Elsewhere. High-risk investments could provide better returns in the long run. ...
- Your Funds Are Uninsured. If you open a CD or a checking, savings or money market account from a bank, your funds are FDIC-insured. ...
- You Can Expect Fees.
However, this only happens very rarely, but because money market funds are not FDIC-insured, meaning that money market funds can lose money.
Tax-Free Money Market (FMOXX) | Fidelity Institutional.
Mutual funds invested in government or municipal bonds are often referred to as tax-exempt funds because the interest generated by these bonds is not subject to income tax.
- Franklin India ELSS Tax Saver Fund. ...
- Baroda BNP Paribas ELSS Tax Saver Fund. ...
- JM ELSS Tax Saver Fund. ...
- Motilal Oswal ELSS Tax Saver Fund. ...
- Sundaram ELSS Tax Saver Fund. ...
- Invesco India ELSS Tax Saver Fund. ...
- Aditya Birla Sun Life ELSS Tax Saver Fund.
The Vanguard Municipal Money Market Fund aims to provide current income that is exempt from federal income taxes while maintaining stability and a high level of liquidity. Because the fund invests in municipal securities that are exempt from federal income tax, the yield is lower than other money market funds.
They must also have a certain amount of liquidity on hand, thus allowing them to cover funds in these cases. What this means is that even if you have more than $500,000 in one brokerage account, chances are high that you won't lose any of your money even if the broker is forced into liquidation.
Your assets are protected at Schwab. We work hard to make Schwab a secure and safe place for your money. Whether you hold securities like stocks, bonds, mutual funds, exchange traded funds, or money market funds in a Schwab brokerage account, or cash deposits in a Schwab Bank account, we have your assets protected.
If you're saving for something you'll need the money for in less than three to five years, saving in a money market fund may make sense for you. Money market funds are ideal for short-term saving because they invest in highly liquid securities with the objective of capital preservation and income.
Is Vanguard Federal money market fund exempt from state taxes?
Three of the six Vanguard money market funds are taxable money market funds. You pay federal income tax on the income earned from these funds. A portion of the income earned is exempt from state income tax. The yield from any of these three funds is very close to each other.
Money market funds typically earn interest slightly higher than a money market or savings account. Access. Unlike a money market account, investors don't have access to funds through debit cards or check-writing privileges.
| Money market fund | Expense ratio | 7-day SEC yield |
|---|---|---|
| Vanguard Federal Money Market Fund (ticker: VMFXX) | 0.11% | 5.3% |
| Fidelity Money Market Fund (SPRXX) | 0.42% | 5% |
| North Capital Treasury Money Market Fund (NCGXX) | 0% | 5.4% |
| Schwab Municipal Money Fund - Investor Shares (SWTXX) | 0.34% | 3.3% |
On Sept. 16, 2008, the Reserve Primary Fund broke the buck when its net asset value (NAV) fell below $1 per share. It was one of the first times in the history of investing that a retail money market fund had failed to maintain a $1 per share NAV. The implications sent shockwaves through the industry.
A money market fund may make sense for fast, flexible access to your cash. If you already have an account with a brokerage firm, you may choose to put your cash in a money market fund until you use it to, say, pay a bill or buy a stock or other mutual fund.
