Vanguard Prime MM (VMMXX) Tax Efficiency?

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jackalope
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Joined: Wed Dec 20, 2017 1:14 pm

Vanguard Prime MM (VMMXX) Tax Efficiency?

Post by jackalope » Sat Jul 28, 2018 2:49 pm

I am new to bogelheads, and I couldn't find the answers to these questions through some searching and reading current threads. I thought I would try asking them here before reaching out to Vanguard.

Given the current rates of Vanguard's Prime Money Market Fund (VMMXX) I moved a good portion of my cash reserves to this fund within the past few months. According to https://advisors.vanguard.com/iwe/pdf/F ... 012018.pdf , in 2017, 20.4% of fund income is from US government obligations, so if I had income from this fund in my 2017 Taxes, 79.6% of that income would apply to my State Taxes, correct? I live in Connecticut, if that would make a difference. In this fund, does this percentage vary much over time? Or will it be about the same percentage for 2018?

Here is the current fund composition:

Image

US Treasuries are currently 17.6% and those should fall into "income from US obligations". Does all or any part of US Govt. Obligations (16.4%) or US Commercial Paper(1.7%) fall into "income from US obligations and won't be state taxable?

Finally, 54.5% of the fund is Yankee/Foreign. Does the fund pay any foreign taxes and will this show up in a 1099 so that it can be used for a foreign tax credit? Any idea how much this would be?

Thanks in advance for any help!

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whodidntante
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Re: Vanguard Prime MM (VMMXX) Tax Efficiency?

Post by whodidntante » Sat Jul 28, 2018 2:55 pm

You'll pay full marginal. Something something percentages.

tibbitts
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Re: Vanguard Prime MM (VMMXX) Tax Efficiency?

Post by tibbitts » Sat Jul 28, 2018 2:56 pm

Every year Prime shows up on the list of funds with income from U.S. treasury securities, it seems like the percentage is usually in the 20-something range if I recall, but I could be wrong.

sport
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Location: Cleveland, OH

Re: Vanguard Prime MM (VMMXX) Tax Efficiency?

Post by sport » Sat Jul 28, 2018 3:20 pm

Some states let you deduct any federal interest from a mutual fund. Other states require that the federal interest must be at least a specified percentage of the total. Check to see the rules for your state.

livesoft
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Re: Vanguard Prime MM (VMMXX) Tax Efficiency?

Post by livesoft » Sat Jul 28, 2018 3:37 pm

http://www.ct.gov/drs/cwp/view.asp?A=1511&Q=267208 suggests the fund needs at least 50% of ....
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Electron
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Re: Vanguard Prime MM (VMMXX) Tax Efficiency?

Post by Electron » Sat Jul 28, 2018 4:01 pm

Take a look at the Vanguard Treasury Money Market fund and Vanguard Federal Money Market fund.

The Treasury fund will be 100% exempt for the state tax. The Federal fund was close to 70% exempt in 2017. If you know your marginal state tax bracket, you can calculate your after-tax yield and compare with alternatives.
Electron

blackwhisker
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Re: Vanguard Prime MM (VMMXX) Tax Efficiency?

Post by blackwhisker » Fri Jan 11, 2019 2:48 pm

livesoft wrote:
Sat Jul 28, 2018 3:37 pm
http://www.ct.gov/drs/cwp/view.asp?A=1511&Q=267208 suggests the fund needs at least 50% of ....
Thanks livesoft!

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