VUSXX taxable for state and local now

[retiringwhen]

Here is the link to my worksheet if folks what to review. It is in a tab of MM Optimize v5

[indexfundfan]

Here are the after tax rates for the Treasury MM funds mentioned above.

the Fidelity FSIXX is the clear winner if you have access. The Gabelli fund is an oddball with high duration/life vs. the rest, but is also very good rates though.

Otherwise Vanguard is still very good after tax rates even at the very highest state tax rates. It only gets more attractive as rate drop. Ironically, most folks in the 10+% state tax rate are better off with Munis.

Thanks for the summary. Do you have a typo? The 7-day SEC yield for FSIXX seems to be 4.47% on 3/10.

[retiringwhen]

You are right. Actually it shows 4.49% for yesterday. I will update in my worksheet.

[indexfundfan]

You are right. Actually it shows 4.49% for yesterday. I will update in my worksheet.

Fidelity shows the 7-day yields for FSIXX as follows
3/10 4.47%
3/11 4.48%
3/12 4.49%

For comparison with the other funds with yields dated 3/10, the 4.47% number seems more appropriate.

[retiringwhen]

Revised.

[indexfundfan]

Another correction: the ER of UTIXX is 0.2% (Summary prospectus 6/30/2022).

The two funds (GABXX and VUSXX) with the lowest expense ratios (0.08% & 0.09%) are neck-to-neck in their yields, and performance.

[retiringwhen]

Another correction: the ER of UTIXX is 0.2% (Summary prospectus 6/30/2022).

The two funds (GABXX and VUSXX) with the lowest expense ratios (0.08% & 0.09%) are neck-to-neck in their yields, and performance.

Fixed in the live copy. ER matters, probably most.

[indexfundfan]

Another correction: the ER of UTIXX is 0.2% (Summary prospectus 6/30/2022).

The two funds (GABXX and VUSXX) with the lowest expense ratios (0.08% & 0.09%) are neck-to-neck in their yields, and performance.

Fixed in the live copy. ER matters, probably most.

Agreed. That's why I went to verify the ER for UTIXX.

[grok87]

what do y'all think about moving from VUSXX to the vgd short term treasury index fund?

[retiringwhen]

what do y'all think about moving from VUSXX to the vgd short term treasury index fund?

VGSH is a fine fund, I own a small amount, but it is NOT by any measure comparable to VUSXX. It has a duration of approx. 2 years, it has much more price volatility. Only appropriate if you want to own longer term bonds. I a portion of my fixed income in VGSH and VTIP as part of a barbell approach with much longer term funds.

VUSXX, is really for stuff I plan on spending in the next 6 mos.

[AQ]

I've moved onto autorolling my own 4 week bills at Fidelity. They make it very easy. Also 0% expense ratio and guaranteed to be 100% exempt from state/local tax.

I started doing that too. Just beware that at Fidelity the autoroll will eat up all your funds availability from transaction date to settlement date of the maturing tbill. I buy tbills in a separate brokerage from where I buy ETFs and my Fido CMA I use as a quasi checking account.

2nd this. Learned it the hard way!!!! I sold some ETF but couldn't buy another to TLH since the settlement account is marked negative due to auto roll!

What does it mean exactly? Suppose I have a $10K tbill auto roll. During the autoroll, will Fidelity eat out 10K from my settlement fund for autoroll, or it will lock the entire settlement fund until the autoroll settled?

[K72]

Yes. I have a 4.25% checking account right now (or more accurately, a cash account, since I write one check a year). Fidelity CMA is great.

Are you saying Fidelity CMA pays 4.25%? When I look at their website I only see 2.34% APY. What am I missing?
https://www.fidelity.com/cash-managemen ... t/overview

[Charles Joseph]

Yes. I have a 4.25% checking account right now (or more accurately, a cash account, since I write one check a year). Fidelity CMA is great.

Are you saying Fidelity CMA pays 4.25%? When I look at their website I only see 2.34% APY. What am I missing?
https://www.fidelity.com/cash-managemen ... t/overview

So Fidelity auto-liquidates money market funds in the Cash Management Accounts. It treats MMFs as cash for checks, debit purchases and ATM withdrawals. It's great. You have to purchase the MMF manually through a trade (like any other trade), but I don't find that to be a big deal at all.

At the time I posted that, the SEC yield for FDLXX (which I hold in my CMA) was 4.25%. Thus my reference to a 4.25% checking account.

Hope that makes more sense.

[K72]

Yes. I have a 4.25% checking account right now (or more accurately, a cash account, since I write one check a year). Fidelity CMA is great.

Are you saying Fidelity CMA pays 4.25%? When I look at their website I only see 2.34% APY. What am I missing?
https://www.fidelity.com/cash-managemen ... t/overview

So Fidelity auto-liquidates money market funds in the Cash Management Accounts. It treats MMFs as cash for checks, debit purchases and ATM withdrawals. It's great. You have to purchase the MMF manually through a trade (like any other trade), but I don't find that to be a big deal at all.

At the time I posted that, the SEC yield for FDLXX (which I hold in my CMA) was 4.25%. Thus my reference to a 4.25% checking account.

Hope that makes more sense.

Thanks,. I think so. This means you keep a minimum balance getting 2.34% and buy FDLXX with the rest?

[Charles Joseph]

Yes. I have a 4.25% checking account right now (or more accurately, a cash account, since I write one check a year). Fidelity CMA is great.

Are you saying Fidelity CMA pays 4.25%? When I look at their website I only see 2.34% APY. What am I missing?
https://www.fidelity.com/cash-managemen ... t/overview

So Fidelity auto-liquidates money market funds in the Cash Management Accounts. It treats MMFs as cash for checks, debit purchases and ATM withdrawals. It's great. You have to purchase the MMF manually through a trade (like any other trade), but I don't find that to be a big deal at all.

At the time I posted that, the SEC yield for FDLXX (which I hold in my CMA) was 4.25%. Thus my reference to a 4.25% checking account.

Hope that makes more sense.

Thanks,. I think so. This means you keep a minimum balance getting 2.34% and buy FDLXX with the rest?

No, I keep no money in the FDIC account. As soon as I deposit funds into the CMA I purchase an equivalent amount of FDLXX. You can buy any of their MMFs, but in my state, FDLXX is free from state tax.

[cacophony]

Given that VUSXX held 23-24% repos at month-end January and February, it appears that a portion of the income will be subject to state/local taxes, at least for states that only exempt direct obligations of the US government. California, Connecticut, and New York require that 50% of the fund’s assets at each quarter-end within the tax year consist of U.S. government obligations. I believe others are proportional, but you should check your state.

Thanks, I am in CA. So at least 2023'Q1 will be state-tax free.
I need to now go the route of buying T-bills direct at auction.

I believe the CA test is 50% US gov't obligations at the end of each quarter, so we won't know if the fund qualifies until the end of the year.

I replaced VUSXX with T-bills bought on the secondary market.

It's my understanding that California both requires 50% and is proportional.
If you have less than 50% you get zero tax break.
If you have between 50% and 99.99% you only get that percentage tax break.

[anon_investor]

I've moved onto autorolling my own 4 week bills at Fidelity. They make it very easy. Also 0% expense ratio and guaranteed to be 100% exempt from state/local tax.

I started doing that too. Just beware that at Fidelity the autoroll will eat up all your funds availability from transaction date to settlement date of the maturing tbill. I buy tbills in a separate brokerage from where I buy ETFs and my Fido CMA I use as a quasi checking account.

2nd this. Learned it the hard way!!!! I sold some ETF but couldn't buy another to TLH since the settlement account is marked negative due to auto roll!

What does it mean exactly? Suppose I have a $10K tbill auto roll. During the autoroll, will Fidelity eat out 10K from my settlement fund for autoroll, or it will lock the entire settlement fund until the autoroll settled?

It will eat $10k from the settlement fund until the maturing tbill settles. So if you have say $1k in your settlement fund, it will go $9k negative.

[grok87]

what do y'all think about moving from VUSXX to the vgd short term treasury index fund?

VGSH is a fine fund, I own a small amount, but it is NOT by any measure comparable to VUSXX. It has a duration of approx. 2 years, it has much more price volatility. Only appropriate if you want to own longer term bonds. I a portion of my fixed income in VGSH and VTIP as part of a barbell approach with much longer term funds.

VUSXX, is really for stuff I plan on spending in the next 6 mos.

thanks. makes sense. i guess i was thinking of moving half of my vusxx over to vgsh or the admiral version. i really hate paying state taxes on what is supposed to be a treasury fund
cheers
grok

[retiringwhen]

what do y'all think about moving from VUSXX to the vgd short term treasury index fund?

VGSH is a fine fund, I own a small amount, but it is NOT by any measure comparable to VUSXX. It has a duration of approx. 2 years, it has much more price volatility. Only appropriate if you want to own longer term bonds. I a portion of my fixed income in VGSH and VTIP as part of a barbell approach with much longer term funds.

VUSXX, is really for stuff I plan on spending in the next 6 mos.

thanks. makes sense. i guess i was thinking of moving half of my vusxx over to vgsh or the admiral version. i really hate paying state taxes on what is supposed to be a treasury fund
cheers
grok

Other options are an auto-roll of 3 or 6 T-bills or SGOV 6 mos. ETF. SGOV is actually a pretty interesting fund for pure play T-Bill investors, it fits a niche between money markets and short-term Treasury Funds, sort of an ulta-ultra-short Treasury Fund. I don't need it, so I am not using it, but I can see the potential for very laddery/bucket investors.

But you really need to do the match and find out if it is worth it, don't become allergic to taxes for the sake of tax avoidance. Vanguard's VUSXX has one of the highest AFTER TAX yields of any money market right now, even for CA investors in very high tax rates when planning for only 75% USGO this year...

I believe it will matter a lot less than you think unless you are in a very high tax state and incurring very high taxable state income, usually over $500K annually. And most investors there would be better of in a Muni anyway.

I am also guessing (and a guess only) that the very high Repo percentages in VUSXX will tail off if rates stabilize or begin to drop. They only make sense in rising environments most of the time. The managers of the fund are active managers and they are reaching for yield in the safest manner possible. Repos won't necessarily be the place to get that yield long-term, and in fact if rates stabilize or drop, then you'll see VUSXX go long (3-4 mos.) pretty quickly.

One of the things I am beginning to appreciate is that active management of money market funds can have some real bottom line value. Vanguard seems to be doing that along with nearly the lowest ER out there. Hard to beat. Pure 100% Treasury funds are actually not able to get the same returns as funds mixing in Repos. That is the market that exists today due to Fed Policy and their implementation of QT.

[beyou]

Just want to mention that snsxx is the schwab equivalent to fdlxx. Similar yield after expense ratios.

Does anyone understand what's going on here to explain? Why do these funds switch to repos?

As stated just above, repos sometimes offer higher yields than directly buying tbills.
A repo is a simultaneous buy/sell of a US Treasury (in this fund at least) at a difference that is income.
Given the fund holds a US Treasury as collateral, just as safe as holding a tbill, but higher yielding.
So why not trade repos ? You get more income but may pay more tax if you are in NY, CT or CA,
but for most shareholders this is a win win. For those of us in NY, CT or CA, it may be a wash, didn't do the math.
But I don't care, there is convenience in having Vanguard buy your tbills just as you have them buy your equities and
bonds in their other funds. I worked in the bond and money market management industry and know well what it takes to
manage a portfolio, and prefer to outsource to my former colleagues at fund managers, and keep the convenience of just collecting
dividends and ease of tax reporting. Also as a small investor, you simply can't execute a repo, so by managing your own portfolio of securities,
you do not realize what market opportunities a fund manage can take advantage of that you may not realize exist for large institutional investors.
There are many products that only large investors can trade and you cannot.

[beyou]

Given that VUSXX held 23-24% repos at month-end January and February, it appears that a portion of the income will be subject to state/local taxes, at least for states that only exempt direct obligations of the US government. California, Connecticut, and New York require that 50% of the fund’s assets at each quarter-end within the tax year consist of U.S. government obligations. I believe others are proportional, but you should check your state.

Thanks, I am in CA. So at least 2023'Q1 will be state-tax free.
I need to now go the route of buying T-bills direct at auction.

I believe the CA test is 50% US gov't obligations at the end of each quarter, so we won't know if the fund qualifies until the end of the year.

I replaced VUSXX with T-bills bought on the secondary market.

It's my understanding that California both requires 50% and is proportional.
If you have less than 50% you get zero tax break.
If you have between 50% and 99.99% you only get that percentage tax break.

This is accurate and same in NY.

[grok87]

what do y'all think about moving from VUSXX to the vgd short term treasury index fund?

VGSH is a fine fund, I own a small amount, but it is NOT by any measure comparable to VUSXX. It has a duration of approx. 2 years, it has much more price volatility. Only appropriate if you want to own longer term bonds. I a portion of my fixed income in VGSH and VTIP as part of a barbell approach with much longer term funds.

VUSXX, is really for stuff I plan on spending in the next 6 mos.

thanks. makes sense. i guess i was thinking of moving half of my vusxx over to vgsh or the admiral version. i really hate paying state taxes on what is supposed to be a treasury fund
cheers
grok

Other options are an auto-roll of 3 or 6 T-bills or SGOV 6 mos. ETF. SGOV is actually a pretty interesting fund for pure play T-Bill investors, it fits a niche between money markets and short-term Treasury Funds, sort of an ulta-ultra-short Treasury Fund. I don't need it, so I am not using it, but I can see the potential for very laddery/bucket investors.

But you really need to do the match and find out if it is worth it, don't become allergic to taxes for the sake of tax avoidance. Vanguard's VUSXX has one of the highest AFTER TAX yields of any money market right now, even for CA investors in very high tax rates when planning for only 75% USGO this year...

I believe it will matter a lot less than you think unless you are in a very high tax state and incurring very high taxable state income, usually over $500K annually. And most investors there would be better of in a Muni anyway.

I am also guessing (and a guess only) that the very high Repo percentages in VUSXX will tail off if rates stabilize or begin to drop. They only make sense in rising environments most of the time. The managers of the fund are active managers and they are reaching for yield in the safest manner possible. Repos won't necessarily be the place to get that yield long-term, and in fact if rates stabilize or drop, then you'll see VUSXX go long (3-4 mos.) pretty quickly.

One of the things I am beginning to appreciate is that active management of money market funds can have some real bottom line value. Vanguard seems to be doing that along with nearly the lowest ER out there. Hard to beat. Pure 100% Treasury funds are actually not able to get the same returns as funds mixing in Repos. That is the market that exists today due to Fed Policy and their implementation of QT.

thanks, i will do the math, i promise! i have just been posting over in a thread about holding reits in taxable where many people are NOT doing the math and think that reits in taxable is a horrible idea!
cheers,
grok

[beyou]

what do y'all think about moving from VUSXX to the vgd short term treasury index fund?

VGSH is a fine fund, I own a small amount, but it is NOT by any measure comparable to VUSXX. It has a duration of approx. 2 years, it has much more price volatility. Only appropriate if you want to own longer term bonds. I a portion of my fixed income in VGSH and VTIP as part of a barbell approach with much longer term funds.

VUSXX, is really for stuff I plan on spending in the next 6 mos.

thanks. makes sense. i guess i was thinking of moving half of my vusxx over to vgsh or the admiral version. i really hate paying state taxes on what is supposed to be a treasury fund
cheers
grok

Other options are an auto-roll of 3 or 6 T-bills or SGOV 6 mos. ETF. SGOV is actually a pretty interesting fund for pure play T-Bill investors, it fits a niche between money markets and short-term Treasury Funds, sort of an ulta-ultra-short Treasury Fund. I don't need it, so I am not using it, but I can see the potential for very laddery/bucket investors.

But you really need to do the match and find out if it is worth it, don't become allergic to taxes for the sake of tax avoidance. Vanguard's VUSXX has one of the highest AFTER TAX yields of any money market right now, even for CA investors in very high tax rates when planning for only 75% USGO this year...

I believe it will matter a lot less than you think unless you are in a very high tax state and incurring very high taxable state income, usually over $500K annually. And most investors there would be better of in a Muni anyway.

I am also guessing (and a guess only) that the very high Repo percentages in VUSXX will tail off if rates stabilize or begin to drop. They only make sense in rising environments most of the time. The managers of the fund are active managers and they are reaching for yield in the safest manner possible. Repos won't necessarily be the place to get that yield long-term, and in fact if rates stabilize or drop, then you'll see VUSXX go long (3-4 mos.) pretty quickly.

One of the things I am beginning to appreciate is that active management of money market funds can have some real bottom line value. Vanguard seems to be doing that along with nearly the lowest ER out there. Hard to beat. Pure 100% Treasury funds are actually not able to get the same returns as funds mixing in Repos. That is the market that exists today due to Fed Policy and their implementation of QT.

thanks, i will do the math, i promise! i have just been posting over in a thread about holding reits in taxable where many people are NOT doing the math and think that reits in taxable is a horrible idea!
cheers,
grok

So how does one do the math here ?
How do you know what the yield would have been had they not used repos ?
Can't compare to other funds, which often have higher ER.
You can construct your own portfolio of Tbills, but would it be the exact same portfolio as Vanguard ?
Would your portfolio get the same price paid for those same tbills (answer no you would pay more and therefore earn less yield).

One comparison is to see how many BPS you lose to NY, CA, CT income tax, and then hope that it's a small enough amount
that Vanguard's fees vs other options, is comparable.

So take today's 4.58% yield, assume 25% will be taxed at 5% (round #s to make the point).
1.145% rate taxed at 5% means you lose 0.057 % to taxes. Almost 6 bps

So the fees on Vanguard VUSXX are 9bps
Fees on Fidelity FDLXX are 42bps
So Vanguard is saving you 33 bps but losing 6bps in taxes.
This assuming FDLXX was 100% treasuries, which may not always be the case.

[indexfundfan]

I was holding VUSXX on Etrade and I swapped it to GABXX, which potentially has no repos. It also has a very slightly lower ER.

[exodusing]

I was holding VUSXX on Etrade and I swapped it to GABXX, which potentially has no repos. It also has a very slightly lower ER.

and a longer average maturity, 32 v 46 days.

[retiringwhen]

I was holding VUSXX on Etrade and I swapped it to GABXX, which potentially has no repos. It also has a very slightly lower ER.

and a longer average maturity, 32 v 46 days.

About half due to VUSXX holding the Repos I would bet. Most of the other Treasury Only are running around 37-39 days.

[exodusing]

I was holding VUSXX on Etrade and I swapped it to GABXX, which potentially has no repos. It also has a very slightly lower ER.

and a longer average maturity, 32 v 46 days.

About half due to VUSXX holding the Repos I would bet. Most of the other Treasury Only are running around 37-39 days.

Another at 35: viewtopic.php?p=7155023#p7155023

[grok87]

VGSH is a fine fund, I own a small amount, but it is NOT by any measure comparable to VUSXX. It has a duration of approx. 2 years, it has much more price volatility. Only appropriate if you want to own longer term bonds. I a portion of my fixed income in VGSH and VTIP as part of a barbell approach with much longer term funds.

VUSXX, is really for stuff I plan on spending in the next 6 mos.

thanks. makes sense. i guess i was thinking of moving half of my vusxx over to vgsh or the admiral version. i really hate paying state taxes on what is supposed to be a treasury fund
cheers
grok

Other options are an auto-roll of 3 or 6 T-bills or SGOV 6 mos. ETF. SGOV is actually a pretty interesting fund for pure play T-Bill investors, it fits a niche between money markets and short-term Treasury Funds, sort of an ulta-ultra-short Treasury Fund. I don't need it, so I am not using it, but I can see the potential for very laddery/bucket investors.

But you really need to do the match and find out if it is worth it, don't become allergic to taxes for the sake of tax avoidance. Vanguard's VUSXX has one of the highest AFTER TAX yields of any money market right now, even for CA investors in very high tax rates when planning for only 75% USGO this year...

I believe it will matter a lot less than you think unless you are in a very high tax state and incurring very high taxable state income, usually over $500K annually. And most investors there would be better of in a Muni anyway.

I am also guessing (and a guess only) that the very high Repo percentages in VUSXX will tail off if rates stabilize or begin to drop. They only make sense in rising environments most of the time. The managers of the fund are active managers and they are reaching for yield in the safest manner possible. Repos won't necessarily be the place to get that yield long-term, and in fact if rates stabilize or drop, then you'll see VUSXX go long (3-4 mos.) pretty quickly.

One of the things I am beginning to appreciate is that active management of money market funds can have some real bottom line value. Vanguard seems to be doing that along with nearly the lowest ER out there. Hard to beat. Pure 100% Treasury funds are actually not able to get the same returns as funds mixing in Repos. That is the market that exists today due to Fed Policy and their implementation of QT.

thanks, i will do the math, i promise! i have just been posting over in a thread about holding reits in taxable where many people are NOT doing the math and think that reits in taxable is a horrible idea!
cheers,
grok

So how does one do the math here ?
How do you know what the yield would have been had they not used repos ?
Can't compare to other funds, which often have higher ER.
You can construct your own portfolio of Tbills, but would it be the exact same portfolio as Vanguard ?
Would your portfolio get the same price paid for those same tbills (answer no you would pay more and therefore earn less yield).

One comparison is to see how many BPS you lose to NY, CA, CT income tax, and then hope that it's a small enough amount
that Vanguard's fees vs other options, is comparable.

So take today's 4.58% yield, assume 25% will be taxed at 5% (round #s to make the point).
1.145% rate taxed at 5% means you lose 0.057 % to taxes. Almost 6 bps

So the fees on Vanguard VUSXX are 9bps
Fees on Fidelity FDLXX are 42bps
So Vanguard is saving you 33 bps but losing 6bps in taxes.
This assuming FDLXX was 100% treasuries, which may not always be the case.

thanks. that is helpful math. I guess as long as the percentage stays at 25% or so it's probably not a big deal. if it ever gets to above 50% some states like NY would start taxing all the interest.
cheers,
grok

[lepa71]

I'm wondering if it is a good idea to use this fund as bond allocation right now until the rates could go down.
This would be in tax-defer accounts.

[tibbitts]

I'm wondering if it is a good idea to use this fund as bond allocation right now until the rates could go down.
This would be in tax-defer accounts.

"Until" the rates "could" go down? Couldn't they always go down? If you're thinking of trying to time the rates, some of us have tried doing exactly what you're thinking of. I actually succeeded once (cleverly not mentioning the times I wasn't); I believe I made double-digit (in dollars, not percentage) excess returns on something like $100k. Before taxes. But a day or two either way and it would have been a different story. Needless to say it wasn't worthwhile, but I was lucky enough that it wasn't harmful either.

[DrivingFun]

It's my understanding that California both requires 50% and is proportional.
If you have less than 50% you get zero tax break.
If you have between 50% and 99.99% you only get that percentage tax break.

Any idea how one goes about finding this information for other states? Would it be the same for Maryland?

Also does anyone know how to capture the proportionate state tax break in TurboTax?

[hlfo718]

I switched to GBIL. Is an ETF but since I don’t need the cash no big deal.

[fetch5482]

Just to compare correctly, lets say I am in CA with marginal tax of 9.2%.

VUSXX currently has 4.59% 7-day yield. Assuming 75% is state tax deductible, that is:
(4.59 * .75) + (4.59 * .25 * (1 - .092) = 4.48443% effective yield (not considering federal taxes for now).

Compare that to Marcus which gives 4.75% (with referral bonus included):
4.75 * (1 - .092) = 4.313%

So right now VUSXX is still better than keeping my money in Marcus in my situation (FDIC insurance not including). The "break even" point in this case would be if Marcus was giving ~4.94% to make the effective yield for VUSXX and Marcus almsot the same.

[cacophony]

It's my understanding that California both requires 50% and is proportional.
If you have less than 50% you get zero tax break.
If you have between 50% and 99.99% you only get that percentage tax break.

Any idea how one goes about finding this information for other states? Would it be the same for Maryland?

Also does anyone know how to capture the proportionate state tax break in TurboTax?

I think you'd have to look through Maryland tax code. I haven't seen any high level summary of how all states treat muni bonds.

[Bogle-007]

Thank you for the information!

Well I'm in NYS. Income is >$500k.

What's the easiest way to move VUSXX to regular treasuries at Vanguard?
Also, how do I get a list of NY municipal funds for comparison (I assume they are all state and fed tax free)?

[DrivingFun]

Can someone explain to me like I'm 5 why national municipal money market is tax free at the federal level, but taxable at the state level (less the proportionate part that was issued in state of residence). However treasury money market is taxable at the federal level but tax free at the state level? Aren't both issues by the government?

[retiringwhen]

Can someone explain to me like I'm 5 why national municipal money market is tax free at the federal level, but taxable at the state level (less the proportionate part that was issued in state of residence). However treasury money market is taxable at the federal level but tax free at the state level? Aren't both issues by the government?

It is the law. That is why. There are constitutional reasons, but really it just the specifics of state and federal tax laws. Note, every state has unique laws on both muni and treasury income.

[increment]

It's my understanding that California both requires 50% and is proportional.
If you have less than 50% you get zero tax break.
If you have between 50% and 99.99% you only get that percentage tax break.

Any idea how one goes about finding this information for other states? Would it be the same for Maryland?

Also does anyone know how to capture the proportionate state tax break in TurboTax?

In Maryland you can subtract the amount attributable to Treasurys. There is no 50% requirement.

The amount should end up on Line 13 of the form 502. Its code letter is "ab," as described in the tax booklet. (Form 502SU will be required if you have more "subtractions" than this one.) I don't know how to coerce this into your particular tax software program.

[DrivingFun]

In Maryland you can subtract the amount attributable to Treasurys. There is no 50% requirement.

The amount should end up on Line 13 of the form 502. Its code letter is "ab," as described in the tax booklet. (Form 502SU will be required if you have more "subtractions" than this one.) I don't know how to coerce this into your particular tax software program.

Thank you. Last question, when people talk about state tax free, this includes local income tax right? For MD for example the higher tax bracket would be 5.75 state + 3.20 local = 8.95%.

[mervinj7]

I'm glad people are paying attention. it's very disappointing that Vanguard is doing this to us (at least for high tax states). Unfortunately or fortunately, I think the optimal solution is to buy T-bills at auction with Vanguard as others have posted. You can find youtube videos on how to do this step by step and its definitely worth the extra yield and tax deductibility. Worth the effort and once you've done it a few times you realize it's easy and you've been leaving money on the table. Good Luck!!

Does vanguard offer auto rolling of tbills ? If not, there are a direct a substitute for Treasury MMF.

[increment]

Last question, when people talk about state tax free, this includes local income tax right? For MD for example the higher tax bracket would be 5.75 state + 3.20 local = 8.95%.

Yes, on Form 502 the Treasury income has been excluded before you calculate line 20 "taxable net income." That is the amount multiplied by 3.2% (or whatever rate) for the local income tax.

[Bogle-007]

I shifted most of my cash balances from VMFXX Vanguard Federal Money Market Fund to VUSXX Vanguard Treasury Money Market Fund due to the fact that VMFXX surprised me this year by making me liable for state taxes by using Repos rather than just holding Treasuries(this was not the case over past decade). Now I see VUSXX has updated their holding and also is now increasingly using Repos after being 100% Treasuries last year. There now is no Vanguard Money Market fund that is just Treasuries without Repo. Need to go to Fidelity FDLXX Treasury Only Money Market Fund. Really disappointed.

I was wondering... did you factor in the lower yield (4.16%) and the higher expense ratio (0.42%) compared to VUSXX?
Source: https://fundresearch.fidelity.com/mutua ... /31617H300

[Bogle-007]

How does Turbo Tax (or other tax programs) decipher how much to state tax to charge? Is this info listed on Vanguard's tax form in a way that the program automatically understands?

[anon_investor]

I shifted most of my cash balances from VMFXX Vanguard Federal Money Market Fund to VUSXX Vanguard Treasury Money Market Fund due to the fact that VMFXX surprised me this year by making me liable for state taxes by using Repos rather than just holding Treasuries(this was not the case over past decade). Now I see VUSXX has updated their holding and also is now increasingly using Repos after being 100% Treasuries last year. There now is no Vanguard Money Market fund that is just Treasuries without Repo. Need to go to Fidelity FDLXX Treasury Only Money Market Fund. Really disappointed.

I was wondering... did you factor in the lower yield (4.16%) and the higher expense ratio (0.42%) compared to VUSXX?
Source: https://fundresearch.fidelity.com/mutua ... /31617H300

That 4.16% yield is from 2/28. The current 7 day yield is 4.24% (as of 3/24):

https://fundresearch.fidelity.com/mutua ... /31617H300

[retiringwhen]

How does Turbo Tax (or other tax programs) decipher how much to state tax to charge? Is this info listed on Vanguard's tax form in a way that the program automatically understands?

Vanguard produces a report they publish ont he website under their tax center. You will need to enter data from that form into TT manually. Not hard, but frankly, the way TT asks the questions can be confusing. BTW, I only enter the data for my tax state (NJ) and lump all the other states into the “other” category.

[exodusing]

How does Turbo Tax (or other tax programs) decipher how much to state tax to charge? Is this info listed on Vanguard's tax form in a way that the program automatically understands?

Vanguard produces a report they publish ont he website under their tax center. You will need to enter data from that form into TT manually. Not hard, but frankly, the way TT asks the questions can be confusing. BTW, I only enter the data for my tax state (NJ) and lump all the other states into the “other” category.

Puerto Rico, Virgin Islands, etc. should be exempt from state tax, or at least they are in NY.

And yes, it's easier to just enter NJ (or whatever) and "other" than to enter multiple lines.