Vanguard Prime Money Market Fund Tax Benefits

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Topic Author
era00100
Posts: 13
Joined: Mon Feb 18, 2019 12:47 am

Vanguard Prime Money Market Fund Tax Benefits

Post by era00100 » Tue Sep 10, 2019 11:15 am

I have a specific question regarding tax benefits for: Vanguard Prime Money Market Fund (VMMXX)

Per the Vanguard website, https://investor.vanguard.com/mutual-fu ... olio/vmmxx, the current portfolio for this fund is listed as:

Certificates of Deposit........7.4%
U.S. Commercial Paper.......5.0%
U.S. Govt. Obligations........13.1%
U.S. Treasury Bills..............14.6%
Yankee/Foreign.................60.0%

I understand this fund cannot be written off of state taxes (since the U.S. Treasury Bills allocation is too low).

However, are there any benefits to the Yankee/Foreign allocation? E.g., potentially writing them off via a foreign tax credit?

I did not see the fund listed here: https://advisors.vanguard.com/VGApp/iip ... ?year=2018, however I am wondering if there are any other tax benefits VMMXX provides.

Silk McCue
Posts: 2860
Joined: Thu Feb 25, 2016 7:11 pm

Re: Vanguard Prime Money Market Fund Tax Benefits

Post by Silk McCue » Tue Sep 10, 2019 11:28 am

No.

Cheers

sport
Posts: 8261
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: Vanguard Prime Money Market Fund Tax Benefits

Post by sport » Tue Sep 10, 2019 11:57 am

era00100 wrote:
Tue Sep 10, 2019 11:15 am
I understand this fund cannot be written off of state taxes (since the U.S. Treasury Bills allocation is too low).
The partial federal interest is deductible for some states but not others. It is for my state.

anon_investor
Posts: 268
Joined: Mon Jun 03, 2019 1:43 pm

Re: Vanguard Prime Money Market Fund Tax Benefits

Post by anon_investor » Tue Sep 10, 2019 12:01 pm

It really depends on what state you reside in.

VMMXX has 0 tax benefit for some states, where VMFXX (Vanguard Federal Money Market Fund) does and for those people it makes more sense to use VMFXX.

Topic Author
era00100
Posts: 13
Joined: Mon Feb 18, 2019 12:47 am

Re: Vanguard Prime Money Market Fund Tax Benefits

Post by era00100 » Tue Sep 10, 2019 12:12 pm

Connecticut

anon_investor
Posts: 268
Joined: Mon Jun 03, 2019 1:43 pm

Re: Vanguard Prime Money Market Fund Tax Benefits

Post by anon_investor » Tue Sep 10, 2019 12:23 pm

era00100 wrote:
Tue Sep 10, 2019 12:12 pm
Connecticut
VMFXX (Vanguard Federal Money Market fund) would be a better choice for you. For CT, any interest earned from US treasuries (provided that the total interest earned is over 50% from US treasuries) would be exempt from CT tax. So with VMFXX you would get a partial state tax exemption for some of the interest earned (for 2018 I believe it was 77-78% CT income tax exempt), whereas for VMMXX (Vanguard Prime Money Market fund) you would get 0 state tax exemption. At least right now since the interest between VMMXX and VMFXX is so close, only a few basis points, the state tax exemption would push VMFXX ahead of VMMXX. Although yields on both are barely over 2% right now and dropping everyday. A good FDIC insured high yield online savings account or an FDIC insured CD have rates high enough to still provide better after tax interest rates.

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