VMFXX NYS tax

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dan916
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VMFXX NYS tax

Post by dan916 »

Hi everyone. Can you help me understand how much of the interest from this vanguard MM fund is NYS taxable?

https://personal.vanguard.com/pdf/USGOIN_01_2022.pdf

The fund is 72.78% made up of US govt obligations. Does this mean 72.78% of the interest is exempt from NYS tax?

I cant seem to find a straight answer for this.

Thank you!
increment
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Re: VMFXX NYS tax

Post by increment »

dan916 wrote: Mon Aug 01, 2022 3:55 pm https://personal.vanguard.com/pdf/USGOIN_01_2022.pdf

The fund is 72.78% made up of US govt obligations. Does this mean 72.78% of the interest is exempt from NYS tax?
Yes, last year. In other years you should expect the result to be different. (Also, the fund's income was 72.78% from government obligations. Its asset makeup would be a different figure.)
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indexfundfan
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Re: VMFXX NYS tax

Post by indexfundfan »

There was some speculation that VMFXX might not qualify for state tax exemption this year in the states that require at least 50% income to come from USGO.
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welderwannabe
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Re: VMFXX NYS tax

Post by welderwannabe »

Maybe start using Vanguard treasury money market, VUSXX.
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Electron
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Re: VMFXX NYS tax

Post by Electron »

Vanguard Cash Reserves Federal Money Market (VMRXX) has been maintaining a higher percentage in U.S. Government obligations all year.

It might be a better alternative. Unfortunately, we won't know the state tax status in VMFXX or VMRXX until early next year.
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anon_investor
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Re: VMFXX NYS tax

Post by anon_investor »

dan916 wrote: Mon Aug 01, 2022 3:55 pm Hi everyone. Can you help me understand how much of the interest from this vanguard MM fund is NYS taxable?

https://personal.vanguard.com/pdf/USGOIN_01_2022.pdf

The fund is 72.78% made up of US govt obligations. Does this mean 72.78% of the interest is exempt from NYS tax?

I cant seem to find a straight answer for this.

Thank you!
If you have cash you do not need for a month, you can buy T-Bills, they are offering a little bit more yield that VMFXX and the yield earned will be 100% exempt from NYS/local taxes.
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dan916
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Re: VMFXX NYS tax

Post by dan916 »

Electron wrote: Mon Aug 01, 2022 5:12 pm Vanguard Cash Reserves Federal Money Market (VMRXX) has been maintaining a higher percentage in U.S. Government obligations all year.

It might be a better alternative. Unfortunately, we won't know the state tax status in VMFXX or VMRXX until early next year.
Im assuming repo agreements are not included in US gov obligations? and T bills are?

It looks like both VMRXX and VMFXX are falling below 50%.

Thanks!
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Re: VMFXX NYS tax

Post by beyou »

indexfundfan wrote: Mon Aug 01, 2022 4:39 pm There was some speculation that VMFXX might not qualify for state tax exemption this year in the states that require at least 50% income to come from USGO.
This fund has exceeded 70% every year for many years, so why is this speculated to suddenly change ?
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beyou
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Re: VMFXX NYS tax

Post by beyou »

indexfundfan wrote: Mon Aug 01, 2022 4:39 pm There was some speculation that VMFXX might not qualify for state tax exemption this year in the states that require at least 50% income to come from USGO.
This fund has exceeded 70% every year for many years, so why is this speculated to suddenly change ?
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retired@50
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Re: VMFXX NYS tax

Post by retired@50 »

beyou wrote: Fri Aug 19, 2022 11:57 am
indexfundfan wrote: Mon Aug 01, 2022 4:39 pm There was some speculation that VMFXX might not qualify for state tax exemption this year in the states that require at least 50% income to come from USGO.
This fund has exceeded 70% every year for many years, so why is this speculated to suddenly change ?
I think forum member Kevin M (ETA: Or was it Electron as noted below) had done some analysis of the holdings of VMFXX after June 30, 2022 and it looked as if the fund wasn't meeting the "over 50%" of USGO threshold for CA, NY etc. I don't know if he or Vanguard has made any additional statements about this.

Regards,
Last edited by retired@50 on Fri Aug 19, 2022 1:29 pm, edited 1 time in total.
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Electron
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Re: VMFXX NYS tax

Post by Electron »

dan916 wrote: Fri Aug 19, 2022 9:27 amI'm assuming repo agreements are not included in US gov obligations? and T bills are?
It looks like both VMRXX and VMFXX are falling below 50%.
VMFXX does not appear to have met the minimum requirements for any state tax exemption this year in CA, NY, and CT.

Vanguard reported the following information on their site for the month ended 6-30-22.

Repurchase Agreements 63.20%, U.S. Govt. Obligations 20.20%, U.S. Treasury Bills 16.60%

U.S. Government obligations (including Treasury securities) need to be at least 50% of fund assets at the end of each quarter for the fund to qualify for any state tax exemption in NY, CA, and CT. See the footnotes in the Vanguard document that you referenced earlier.

VMRXX has maintained a higher percentage in U.S. Government obligations all year compared with VMFXX. I believe it has met the 50% requirement at the end of March and the end of June. Unfortunately, the amount of any state tax exemption will not be known until early next year.

Here is a thread that may be of interest.

viewtopic.php?p=6733406#p6733406
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beyou
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Re: VMFXX NYS tax

Post by beyou »

Electron wrote: Fri Aug 19, 2022 12:32 pm
dan916 wrote: Fri Aug 19, 2022 9:27 amI'm assuming repo agreements are not included in US gov obligations? and T bills are?
It looks like both VMRXX and VMFXX are falling below 50%.
VMFXX does not appear to have met the minimum requirements for any state tax exemption this year in CA, NY, and CT.

Vanguard reported the following information on their site for the month ended 6-30-22.

Repurchase Agreements 63.20%, U.S. Govt. Obligations 20.20%, U.S. Treasury Bills 16.60%

U.S. Government obligations (including Treasury securities) need to be at least 50% of fund assets at the end of each quarter for the fund to qualify for any state tax exemption in NY, CA, and CT. See the footnotes in the Vanguard document that you referenced earlier.

VMRXX has maintained a higher percentage in U.S. Government obligations all year compared with VMFXX. I believe it has met the 50% requirement at the end of March and the end of June. Unfortunately, the amount of any state tax exemption will not be known until early next year.

Here is a thread that may be of interest.

viewtopic.php?p=6733406#p6733406
Unless repos backed by gov bonds count.
Not sure it would, but this is unprecedented if true, for this fund.
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Electron
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Re: VMFXX NYS tax

Post by Electron »

beyou wrote: Fri Aug 19, 2022 2:11 pmUnless repos backed by gov bonds count.
Not sure it would, but this is unprecedented if true, for this fund.
My guess is that return in both VMFXX and VMRXX is a higher priority than the state tax exemption for CA, NY, and CT.

It really will be a disappointment if there is a major change in the state tax exemption for some shareholders this year.

Note that many of the repurchase agreements are with the Federal Reserve Bank of New York.

The June 30 holdings in VMFXX included a huge $129.9 billion Treasury REPO with the Federal Reserve Bank of New York representing over half of fund assets.

The repurchase agreements are generally overnight REPOs. That may explain why the yield has risen so quickly after Fed rate hikes.
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beyou
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Re: VMFXX NYS tax

Post by beyou »

Electron wrote: Fri Aug 19, 2022 3:29 pm
beyou wrote: Fri Aug 19, 2022 2:11 pmUnless repos backed by gov bonds count.
Not sure it would, but this is unprecedented if true, for this fund.
My guess is that return in both VMFXX and VMRXX is a higher priority than the state tax exemption for CA, NY, and CT.

It really will be a disappointment if there is a major change in the state tax exemption for some shareholders this year.

Note that many of the repurchase agreements are with the Federal Reserve Bank of New York.

The June 30 holdings in VMFXX included a huge $129.9 billion Treasury REPO with the Federal Reserve Bank of New York representing over half of fund assets.

The repurchase agreements are generally overnight REPOs. That may explain why the yield has risen so quickly after Fed rate hikes.
While I live in NY, one should not let the tail wag the dog. The yield has risen rapidly on this fund, and it may just be a better after tax return than VUSXX.

That said, I also don’t worry about mmkt fund absolute performance. I am glad Vanguard has better yields than most, but I have most of my assets in their bond and equity funds. For convenience I keep some cash in their mmkt and in my much lower yielding bank accts. Convenience counts too, and VUSXX might be a better choice if one could pick as a sweep but not sure I want to have multiple mmkt funds and therefore Federal will have to do.
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Electron
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Re: VMFXX NYS tax

Post by Electron »

retired@50 wrote: Fri Aug 19, 2022 12:05 pm I think forum member Kevin M (or was it Electron as noted below) had done some analysis of the holdings of VMFXX after June 30, 2022 and it looked as if the fund wasn't meeting the "over 50%" of USGO threshold for CA, NY etc. I don't know if he or Vanguard has made any additional statements about this.
Here is a link from the Vanguard Tax Center showing the expected dates for the various tax documents.

The 2022 USGO document is expected early next week. It will be very interesting to finally see the USGO percentages for VMFXX and VMRXX. :happy

https://advisors.vanguard.com/tax-center

https://advisors.vanguard.com/iwe/pdf/FASUSGO.pdf
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