Bogleheads.org

If there are no other deductions, in the current tax environment the interest paid on the mortgage loan benefits the borrower only marginally at the tax time. Interest for $750k at 2.5% in the first year when the amount of interest would be the max = $18,556.04. Adding 10K SALT takes the total deduction over the 24k standard deduction by $4556.04. So if they had no mortgage, they would use 24k standard deduction. With 750k mortgage, they can take $28556.04 as deduction. Depending on the marginal tax rate, tax benefit is minor at $1k to $2k. Paydown to 750k may not be relevant IMO The benefit is different for each dollar. Paying down the mortgage from $900K to $750K eliminates entirely non-deductible interest. Paying it down from $750K to $...

The cost of leverage does increase with interest rates, but so does the benefit, so it washes out. Every dollar in a 3x leveraged fund is equivalent to $3 in the underlying security and a short position of $2 in Treasury bills. (It might not actually be that position, as it could hold futures or options rather than borrowing, but the returns should be equivalent.) Thus, if you hold $1 in a 3x leveraged fund and $2 in Treasury bills, you have the same portfolio as if you just held $3 in the underlying security, with the same returns before expenses. Expenses are usually the reason to avoid this leverage unless you need it. If you have a $100K portfolio and you actually want to hold $200K in stock, you'll need to find some way to leverage it:...

These days, there are great options that are starting to pay real money. Ally has an 11 month, no penalty CD paying 4.75%. I opened one and may open yet another. Redneck Bank's money market pays 4.55%. So beating your mortgage rate is now easy. I'm a huge "pay off your mortgage, it's just debt" guy but with these higher interest rates available, if I had your mortgage, I wouldn't pay an extra cent. This isn't quite a fair comparison, though. If you pay down a 10-year mortgage, you get a guaranteed return in 10 years, so the right comparison is to a 10-year bond. If you invest in a money-market fund or short-term CD instead, you will have to reinvest at an unknown rate. The yield curve is currently inverted, which implies that bon...

Atlantic_ave wrote: ↑Mon Mar 27, 2023 3:57 am People seem to be pitching in with no idea how a 401k loan works. There are no penalty or double taxation. Only drawback is to be out of the market. It can make aense in many cases, especially in a elevated rates environment.

And you don't have to be out of the market. You can take the 401(k) loan with money that was in a bond fund. (If your loan is disbursed proportionally, you can reallocate after taking it out.) You keep the same number of dollars in stock.

However, if your employer does not allow you to contribute to the 401(k) while you have an outstanding loan, this can cost you; you may lose the employer match.

You would also be able to capture the rate spread between your mortgage rate and prevailing interest rates by buying bonds. With an annuity, you are buying longevity insurance by accepting a lower rate of return on your capital, but if you’re not needing the longevity insurance (and you probably don’t based just on the mortgage -it’s a fixed term, then the payments stop) you will probably come out ahead on average by buying bonds instead. A term-certain annuity is equivalent to a bond ladder; you will receive $X each month for, say, 10 years, independent of longevity. However, the annuity gives up liquidity, which might be relevant here. If you buy a bond ladder, and then interest rates drop so that the after-tax yield on your bonds is les...

The CD ladder is essentially equivalent to a short-term bond fund. A short-term Treasury fund might hold 20% each in Treasury bonds maturing in 1-5 years; a five-year rolling CD ladder holds 20% each in CDs maturing in 1-5 years. Either way, you have guaranteed payments at specific future times.

Therefore, this is a fine plan, if the amount and type of stock make sense for you. (If you want one stock fund which includes international as well, you should use VT; if you are willing to have two stock funds, you should use VTI/VXUS in whatever ratio is appropriate for you.)

It could have a minor effect, because the marginal tax rate on SS varies with the phase-in. If you increase either your SS benefit or your other income, then: When half your SS plus your other income reaches $25K single/$32K joint, every additional $1 of SS makes 25 cents of SS taxable (since it adds 50 cents to the income used for computation). Thus, if you are in the 12% tax bracket, your marginal tax rate on SS is 3%. Your marginal tax rate on other income is 18%. When half your SS plus your other income reaches $34K single/$44K joint, every additional $1 of SS makes 42.5 cents of SS taxable. Thus, if you are in the 12% tax bracket, your marginal tax rate on SS is 5.1%. Your marginal tax rate on other income is 22.2%. When you reach the ...

One non-math issue: why is the dealer doing this? A 2023 truck would normally command a premium of more than $1000 over a 2022 truck that has already been driven 5000 miles. Is the new truck possibly a lemon?

The next meeting of the DC Bogleheads will be from 4:00-5:30 (note unusual time) on Sunday, May 21, 2023 in meeting room #2 at the Brigadier General Charles E. McGee Library, 900 Wayne Ave, Silver Spring, MD. This is the same library we have used in the past, but it has been renamed. The location is a short walk from the Silver Spring station on the Metro Red Line. Take the "South side Colesville Road" exit from the Metro station, turn right, then right on Wayne Avenue (walking around the bus depot), and go five blocks to Fenton Street; the library is on the right. Parking garages in downtown Silver Spring are free on Sundays. The closest garage is at Wayne and Fenton, diagonally across from the library. We do not have a specific ...

Megamill wrote: ↑Sat Mar 25, 2023 9:12 am I opened a brokerage account (UTMA) for DS several years ago which unfortunately is sitting at a large loss. He is no longer a minor and therefore legally entitled to the assets. So the options are to either transfer to a new account solely in DS's name or liquidate. Does anyone here know if we choose to liquidate, will the parents get to claim the tax loss or will DS?

DS claims the loss on his own tax return. However, if he is still subject to the kiddie tax, the loss might be computed at the parents' tax rate, just as DS's investment income is.

The price of diversification is about the same whether you hold the international funds in taxable or tax-deferred accounts.

In a tax-deferred account, you lose the foreign tax withheld.

In a taxable account, you usually get back the foreign tax withheld, but you pay more tax on non-qualified dividends and on the higher dividend yield. The net is close to zero in moderate tax brackets. (In high-tax states, the international fund is less tax-efficient; in those states which allow a foreign tax credit, the international fund is more tax-efficient since the credit is usually equal to the state tax on the fund.)

Fired2020 wrote: ↑Sat Mar 25, 2023 11:43 am I'd be curious to know, do international ETF's report foreign-taxes paid as regular mutual funds do?

Yes, they do. At Vanguard, the international ETFs that are share classes of index funds have the same foreign tax amount.

David

However, since you have a large pension, you can afford to take more risk with your investment portfolio, and thus hold more stock. If half your retirement income comes from the pension, then you can hold 80% of your portfolio in stock and still lose only 20% of your retirement income if the stock market loses half its value; a similar investor with no pension could hold only 40% stock at that risk level. Please help me understand this concept cognitively. I’m not the very brightest build in this house, so please show the grade school math for me. (I know, it makes me look foolish. My wife and I are having beautiful discussions on finance and our AA. Bogleheads has help me bring us into the thought process that has reduced much of the anxi...

If you want to lower your income, you could consider Placing cash needs in a tax-advantaged account . Put the entire taxable $455K in a stock index fund (and prefer US stocks for the lower dividends). If this gives you more stock than you are comfortable with, then move some money from stock funds to low-risk bond funds in your IRA/403(b)/457(b). Now, if you decide to buy a home, you can sell stock for the down payment, and move an equal amount back from bonds to stock in the retirement plans. However, this will cause some issues with PSLF if you make the down payment before your loans are forgiven. If the stock rises by 50% in four years, and you make a $300K down payment, you will have a $100K capital gain, which will cost you more in PSL...

The reason not to concentrate holdings with your employer is the correlation between your job and investments. If you work for Apple and own Apple stock, and Apple runs into financial trouble, you may get laid off and lose stock value at the same time. This doesn't apply to a government job. If your government agency has a reduction in force, this won't cause the G fund to lose value. However, since you have a large pension, you can afford to take more risk with your investment portfolio, and thus hold more stock. If half your retirement income comes from the pension, then you can hold 80% of your portfolio in stock and still lose only 20% of your retirement income if the stock market loses half its value; a similar investor with no pension...

Marseille07 wrote: ↑Thu Mar 23, 2023 1:07 am Bond funds don't lock in rates, as the fund manager keeps shuffling bonds.

If locking in is your goal, you need to buy bonds directly.

And even if you did buy the individual bonds held by VCLT, you wouldn't quite lock in the return. VCLT is an index of long-term corporate bonds, half rated BBB, and based on historical default rates, you would expect about 5% of BBB bonds (and 2% of A bonds) to default within ten years.

You can lock in 10-year Treasury rates by buying a 10-year Treasury bond directly, but that yield is only 3.38%. The higher yield of corporate bonds is compensation for that risk.

I have been looking at Wellington and Wellesley for a few years. If one considers distributions Wellington pays higher than Wells but Welles is an income fund. What am I not understanding? Wellesley = 37% stock, 63% Bond Wellington = 66% stock, 34% Bond Wellelsey is called an income fund mostly because it is allocated as 37/63. It's common for conservative funds like that to be called "income", and sometimes more aggressive ones are called "growth", and those in the middle, like Wellington, might be called "balanced". Wellelsey also favors higher-dividend stocks, and corporate rather than Treasury bonds, so it distributes more in dividends than other conservative balanced funds such as LifeStrategy Conservativ...

[Thread merged into here --admin LadyGeek] This is a repost with more info. After reading...https://www.bogleheads.org/wiki/Tax-eff ... _placement. I'm I correct in stating where the following funds be placed for maximum tax efficiency? I had a little hard time understanding the article. TAXABLE: IJS.......................iShares S&P Small-Cap 600 Value ETF VTI......................Vanguard Total Stock Market Index Fund ETF VXUS....................Vanguard Total International Stock Index Fund ETF TAX DEFERRED: VNQ.....................Vanguard Real Estate Index Fund ETF VAIPX...................Vanguard Inflation-Protected Securities Fund Admiral Shares VBTLX..................Vanguard Total Bond Market Index Fund Admiral Shares VWEAX.......

I have the ftse large cap ex-us and ftse small cap ex us vanguard funds only in my taxable account. I think yielding roughly 3%. How would you rank these non us funds ? I’m debating how good they are as although I paid $2k + in foreign tax, I only seem to get credit for $400 :( If you are running into a limitation on the foreign tax credit, then foreign funds are tax-inefficient for you, and it is better to hold US stock funds in a taxable account. Last year, FTSE Ex-US Small-Cap Index (VSS) was extremely tax-efficient if you got the full credit, because 16% of the dividend was withheld as foreign tax. However, this is not typical; 8% is a more normal portion of international dividends to be withheld as foreign tax. At that tax rate, US an...

rosemary11 wrote: ↑Thu Mar 23, 2023 4:53 pm The simplest AA to achive constant 60 percent stocks 40 percent fixed G
Now
60 percent. L2065
40 percent G fund

Sometime after 10 yrs
60 percent L 2075 or 2080
40 percent G fund

However, this will need to be rebalanced regularly, which L funds do not need. If the stock market loses 1/3 of its value (as it did in March 2020), the 60/40 allocation will become 50/50 and you will need to sell the G fund and buy a stock fund to get the full benefit from any recovery.

The “tax cost ratio” of the tax managed balanced fund (VTFMX) is substantially less than that of Wellesley (the other fund you list). This is because Wellesley focuses on dividend stocks and taxable bonds, both of which are less than ideal for a taxable account. Tax cost ratio is not the right measure here. The tax cost of a fund is the difference between pre-tax and after-tax returns, so it is zero for municipal bonds. However, municipal bonds have a cost for avoiding the tax, as they yield less than taxable bonds of comparable risk. My rule of thumb is that the tax cost of munis is 1/3 of the yield (and thus muni and taxable bonds break even at a 25% tax rate.) And as a separate issue, the published tax costs assume the highest federal t...

In the case of a money-market fund, those assets are Treasury bills, which do not lose value. A shareholder with $1M in assets can withdraw them by requiring the fund to sell 1/1000 of its Treasury bills, which can be sold for face value and will thus give the shareholder $1M. This is false and misleading. The NAV of the fund is the NAV of the fund. T-bills are priced at a discount and if sold would be sold at that discount, not par. T-bills routinely lose money over the short term. Well, the very short term. You can’t force a fund to sell above the limits in the prospects. I have worked besides the mutual fund trading desk where the can say no to large or late trades. You maybe could argue for a in-kind distribution but those are not easy...

You have to check the tax rules for various benefits. Many tax benefits are based on "modified AGI", and which modifications you make depends on the specific benefit.

For example, IRA contribution limits do not count tax-exempt income, while the phase-in of Social Security taxation does count it.

Most taxpayers who are considering muni bonds are in too high a tax bracket to benefit from any of the AGI-based provisions. However, munis are attractive even in the 22% bracket if you hold bonds in a taxable account and there is a low-cost muni fund for your high-tax state.

The difference between a mutual fund and a bank is that the mutual fund owners have a claim on specific assets, while the bank depositors have a claim only on the general assets of the bank. If a bank has $1B in deposits, it doesn't have $1B in cash, but a depositor with $1M has the right to receive $1M in cash at any time. If a mutual fund has $1B in assets, it owns securities which are currently worth $1B, but the shareholders only have a claim on the value of those assets when they withdraw the assets. A shareholder with $1M in the mutual fund has a right to 1/1000 of the assets of the fund. In the case of a money-market fund, those assets are Treasury bills, which do not lose value. A shareholder with $1M in assets can withdraw them by ...

* Due to advantage of lower standard deduction and claim medical deductions, they will file MFS (Married Filing Separately) what do you mean by this? obviously you're itemizing if it's more advantageous than taking the standard deduction but if you itemize for one and file MFS you have to itemize for the other. That could wind up with a much lower deduction for the one who isn't claiming the medical expenses. However, you can still come out ahead if one person pays all the medical expenses. Suppose that each spouse earns $100K, and the medical expenses are $15K. Since that is 7.5% of their $200K AGI, there is no medical deduction. Now suppose they file separately, and one spouse pays the full $15K. That spouse gets to deduct $7500 for medi...

Do they actually have zero AR income? If they received dividends or bank interest after the day they changed residency, that income would be taxable to AR (and not to NY). It appears that in AR, as in most states, part-year residents must file state taxes if they have even $1 of AR income while a resident.

Here's an example of the benefit. I have been buying Emerging Markets Index ever since 2002. Emerging markets had a great run from 2002-2007, so much that I almost needed to sell the fund to rebalance. Then, when the market crashed in 2008, I had gains on shares bought in 2002-2004 and losses on shares bought in 2005-2008. With average cost, I could not have sold for a capital loss. With specific identification, I sold the shares with losses, taking a large capital loss. Every year since 2008, I have had a $3000 capital loss to deduct against ordinary income, which is worth $966 per year to me in my 32.2% combined federal and state tax bracket. I also had to sell stock in 2013 at a market peak, and had capital loss carryovers to offset the ...

retiredjg wrote: ↑Mon Mar 20, 2023 7:46 am Vanguard Tax Managed Balanced fund is the only balanced fund I would consider for a taxable account in the 35% tax bracket.

Agreed. For this purpose, it is the right single fund assuming that its allocation of 49% stock is appropriate.

And for this purpose, it avoids my usual criticism of this fund. If you have a balanced fund and want to sell bonds (to hold fewer bonds, or a different type of bonds, or bonds in a different account), then you have to sell stocks at the same time and likely pay capital-gains tax. But the in-law is not likely to need to sell the bonds, and the heirs can switch to a different fund when they inherit it.

Mike Scott wrote: ↑Tue Mar 21, 2023 5:05 pm Vanguard has a 50/50 Tax Managed Balanced Fund you might add to your list.

This probably isn't the right fund in a 24% bracket; the munis are taxable in NY. (In a higher bracket, it is a good one-fund portfolio if its 49% stock allocation is right for you.)

If she is willing to hold separate stock and bond funds, she could hold NY munis, but non-NY munis likely don't do any better than taxable bonds of the same risk level.

As a single fund for simplicity, I would prefer LifeStrategy Moderate Growth, which includes international stocks as well as US stocks. The tax cost is about the same as Balanced Index, but the portfolio is better diversified.

If there were no expected premium to earn from small cap value, would you still hold it above the market weight? If the true answer for your case is yes, then tilt; if not, then do not tilt. I wouldn't word it quite that way. If the only premium for small-cap value is a compensation for the additional risk, would you hold it above the market weight? Small-cap stocks are known to be riskier than large-cap stocks, and thus even in an efficient market, investors would only buy them if they expect higher returns. If that is the only benefit, you might still decide to overweight. I have a reasonable tolerance for risk because of my long horizon. If the risk of US SCV benefits from a longer horizon, then I will overweight. I do the same. I have ...

The ironic thing is that people generally want their taxable accounts to give off LESS dividends to protect from dividend tax drag every year. I want taxable dividends to make up my non-discretionary spend when i retire. Let's see if i can get close. Who knows - currently around $20k a year, $40k a year would be great imo. It's still better to do this with lower dividends. Suppose that you have $1M of stock and you want to withdraw $40K a year from that portfolio, and you pay 15% tax on qualified dividends and capital gains. If your stock has a 4% dividend yield, you have a $40K dividend and pay $6K in tax. If your stock has a 2% dividend yield, you have a $20K dividend and must sell $20K of stock. If that $20K in stock was bought for $10K...

If you don't need to spend the money from the inherited IRA, it should be part of your overall asset allocation. In particular, if you withdraw $X from the inherited IRA and contribute $X to your 401(k), the fact that it was an inherited IRA is irrelevant, as the money stayed tax-deferred. If you are maxing out tax-favored accounts and have to withdraw from the inherited IRA to invest in taxable, then it is better to hold bonds in the inherited IRA to minimize the tax cost. Now, if you have an RMD of $X, you take that RMD from the bond fund, buy $X of stock with it for tax efficiency, and move $X from stock to bonds in some tax-advantaged account if you want to keep the same asset allocation. The reason this minimizes the tax cost is that t...

Choosing to put some of your emergency fund in VCLAX is one thing, but unless your 457b is less than your desired bond allocation I would not bother with bonds in taxable. While this is normally a good recommendation, I do not believe it is correct for the OP, who is in a 35% federal and 9.3% CA tax bracket. The reason is that they have a higher tax cost than other investors on a taxable account (15% or 20% federal + 3.8% NIIT + 9.3% CA = 27.1% or 32.1% on qualified dividends and long-term gains, and 47.1% on any non-qualified dividends), but no more tax cost than anyone else on CA munis. (The tax cost of munis is the difference between yields of muni and taxable bonds of comparable risk). Therefore, I would recommend holding CA munis in t...

secondopinion wrote: ↑Tue Mar 21, 2023 11:03 am If there were no expected premium to earn from small cap value, would you still hold it above the market weight? If the true answer for your case is yes, then tilt; if not, then do not tilt.

I wouldn't word it quite that way. If the only premium for small-cap value is a compensation for the additional risk, would you hold it above the market weight? Small-cap stocks are known to be riskier than large-cap stocks, and thus even in an efficient market, investors would only buy them if they expect higher returns. If that is the only benefit, you might still decide to overweight.

And I also have a NaN error. I get a message that I might benefit by holding some percentage of my bonds in foreign bonds. The percentage that is currently in bonds is actually 0/0. Did you see the percentage actually rendered onscreen as "NaN?" If so, that rules out the theory that the spurious "0%" values are really NaNs. The percentage is not rendered on my screen at all, but it is being treated as if it were a number. 0% of my portfolio is in domestic bonds, and 0% is in foreign bonds. Therefore, the actual percentage of my bonds which are foreign is NaN. And according to the IEEE standard, any comparison with NaN is false; in particular, it is not less than whatever Vanguard considers the minimum foreign bond alloc...

TSP G Fund yield right now is 4.125% annualized Inflation is 6% through Feb 2023. So negative real return of 1.875% at least for the time being. Safety comes at a cost. While it does come at a cost, this is not a fair comparison, because inflation is backward-looking and bond yields are forward-looking. Investors do not expect inflation for the next year to be 6%. The current yield on a one-year Treasury bond is 4.33%, and on a one-year TIPS is 1.70%, so investors are expecting about 2.63% inflation over the next year. But the cost of getting safety (whether in the G fund or in some other bond fund) is a good reason for getting as much risk reduction per low-risk dollar as possible. You can do this in the G fund without sacrificing as much...

I found the same errors. My REIT Index is 100% uncategorized (rather than being in the real estate sector), and neither Total Stock Market Index nor Value Factor ETF has any holdings in Consumer Discretionary. And I also have a NaN error. I get a message that I might benefit by holding some percentage of my bonds in foreign bonds. The percentage that is currently in bonds is actually 0/0. (I do hold bonds, but I hold them in a non-Vanguard employer plan, so Portfolio Analysis doesn't see them.) If Portfolio Analysis is working correctly, its messages are useful. They indicate deviations from the model portfolio, which are OK in your own portfolio if you do them deliberately. Thus, Portfolio Watch tells me correctly that I overweight real es...

Which version of TIAA Traditional do you have? If you have the version that can only be liquidated in 10 annual payments, then you effectively have a fund with a 4.5-year duration. If rates rise, you don't immediately lose money, but the yield will not rise quite as fast, so you may earn less than the market rate. If you want to sell the fund, you still have to keep earning the old, lower rate on the portion you haven't sold, and the full sale takes nine years.

In return for this loss of the ability to liquidate quickly, you gain the benefit of a higher interest rate than on other flavors of the fund. You cannot use the fund for short-term cash needs, but it is one of the best fixed-income options around.

Actually, since I posted, I decided, for now, I will only stick to tilting to US small-cap value. So 56% US TSM, 14% AVUV, 30% International TSM. I try to hold international and international SCV in my tax-as any accounts because of the higher dividends, but that optimization depends completely on your tax rates Do you mean US and international SCV in tax-as any accounts? Just to clarify. I am leaning towards putting AVUV in both taxable and tax advantaged. I think AVUV is pretty tax efficient, so, fine for taxable. I keep more of my IXUS/VXUS, VWO, and AVDV in tax-deferred. I keep some additional IXUS in taxable to meet my target allocation If you are interested in overweighting small-cap value, particularly in a taxable account, factor f...

If the non-covered shares with unknown basis have capital gains, you can avoid the problem of not knowing the gain amount by donating them to charity. (Don't do this just for the tax advantage, but if you do want to make a large donation to charity, using shares on which you would have large capital gains gives a further tax benefit.)

...muni funds never have capital gains. This isn't true in general, is it? Apparently the Vanguard High Yield Tax-Exempt Fund distributed capital gains in 2021 https://investor.vanguard.com/investment-products/mutual-funds/profile/vwahx#distributions I'm surprised that I wrote this; I probably meant that they seem to have avoided capital gains recently despite the falling rates. In fact, Vanguard NJ Long-Term Tax-Exempt itself has distributed some capital gains, as its 10-year after-tax return is 0.12% lower than its 10-year pre-tax return. This indicates an average capital gain of 0.60% of the fund value (assuming that the gain is always long-term and thus taxed at 20%). While muni funds should try to avoid capital gains (since their inve...

I live in NJ and do keep significant amount of cash in my brokerage account in the Vanguard Treasury Money Market to minimize our NJ State Tax Obligation. We also use the Vanguard Limited Term Tax Exempt and Intermediate Term Tax Exempt funds as well which do owe NJ taxes on, but are Federally tax exempt. These funds are for shorter term goals (4-8 years). Rather than Intermediate-Term Tax-Exempt, you might use a 50/50 split of Limited-Term Tax-Exempt and NJ Long-Term Tax-Exempt. This would have the same duration as Intermediate-Term Tax-Exempt, but more than half the income would be exempt from NJ tax, as would most of the capital gains since I believe NJ Long-Term Tax-Exempt is a NJ qualified investment fund. If tax efficiency was my ult...

greybus wrote: ↑Sat Mar 18, 2023 5:39 pm I believe VGIT and GOVT are treasury ETFs so their dividends (and capital gains?) should be tax exempt for state taxes right?

Dividends are state tax-exempt. Capital gains on Treasuries are usually state-taxable; NJ is the only state I know in which they are not taxed.

The wiki is back up for me; I just edited it with no problems.

And the wiki is usually giving 503 errors (Service unavailable); I once got the text of the home page but not most of the images.

I have been told that the yield you should get from a bond fund would be the yield you get when buying the fund. Which yield should I look at: SEC yield or distribution yield or yield to maturity? Is this expected yield over the duration of the fund or over the long term, longer than the duration? The SEC yield is the number you want. For non-callable bonds such as Treasuries, the SEC yield will be the yield to maturity minus expenses. The SEC yield published by a fund is likely to be closer to current. (Even the SEC yield is not quite current because it is an average over 30 days; current SEC yields do not fully reflect the rapid drop in yields in the last week.) If the yields on the bonds in a fund do not change, you will earn the SEC yi...

Eno Deb wrote: ↑Thu Jan 12, 2023 12:51 pm

123 wrote: ↑Mon Jan 09, 2023 12:59 pm

hoofaman wrote: ↑Mon Jan 09, 2023 12:35 pm ...Would each option provide the state tax exception in 1099?

Yes.

From my experience that is not the case. Funds like VGSH pay a monthly dividend, and all or a large portion of that is state-tax exempt. But the brokerage doesn't necessarily know how big the portion is, so it does not show up in the 1099-DIV. It is the responsibility of the tax payer to determine and exclude the exempt portion from the state tax return.

The information is available from the fund provider. At Vanguard, for example, Vanguard funds that held U.S. government bonds (i.e., government obligations) (PDF)

OP, you should check the current yield and the yield to maturity. The current yield can be calculated by dividing the monthly payouts by the fund share price. You will find it is closer to 5.8% than 7+%. Some will say the fund earns the 7% yield to maturity when it sells bonds; however, with an inverted yield curve, the shorter-term bonds sold by the fund may require a higher yield-to-maturity than the longer-term bonds they purchase. But that would be just as much the case if the fund was paying out the same amount as the dividend yield. If the yield on a bond increases between today and the day the fund sells the bond, your total return on the bond will be less than the yield to maturity. If the bond is currently at par (distribution yie...

This fund should only be held in an IRA, because the high dividend yields are taxable at your full tax rate. (And, even worse, the dividend yield is more than the expected return, since you will lose capital when some bonds default or are sold after downgrades.) In an IRA, it's fine to hold this fund, but you should recognize that it behaves like half bonds and half stocks, not like other bond funds. In an economic decline, the stock market falls, and bond defaults become more common, so junk-bond funds lose value as well. The current situation shouldn't really affect your investment decisions. High-yield bond funds have more risk than investment-grade bond funds, but the yield is a fair compensation for the risk. If the risk increases, the...

Check your other funds as well. Many funds, even stock funds, hold a small amount in Treasury bills, and thus some of the dividends may be exempt from state tax in most states. (Some states have a rule that a fund must be 50% invested in securities exempt from state tax to get a partial exemption.)