Which money market fund pays you the most?
The one with the highest yield often isn’t. Treasury funds skip state tax, muni funds skip federal tax, and a fund from your own state can skip both. Four questions work out which one leaves you the most, on today’s yields.
Who taxes what
A money market fund’s yield is already after its fees. What decides what you keep is where its income comes from.
A government fund like VMFXX is taxed federally, with the 3.8% on investment income above $200,000 single or $250,000 joint. Your state taxes only the part not earned on U.S. Treasury and agency debt: 66.6% of VMFXX’s income last year was, so the other 33.4% is taxed.
A Treasury fund like VUSXX is the same federally, and all of its income is free of state and city tax.
A municipal fund like VMSXX is free of federal tax and the 3.8%, but your state taxes it, unless you live in the District of Columbia or North Dakota. A fund from your own state, VYFXX for New York and VCTXX for California, is free of both, and of New York City’s tax.
The tax-equivalent yield is what a savings account, taxed by everyone, would have to pay to leave you the same.
Two people, two answers
Single in New York City, $300,000 a year. VYFXX pays 3.21% and keeps 3.21%, as good as a savings account paying 6.36%. VMFXX pays 3.79% and keeps 2.18%.
Married in Texas, $150,000 a year. No state tax and no 3.8%, so VMSXX leads at 3.25% after tax, ahead of VMFXX at 2.96%.
Yields move every day, and the order moves with them. That is why the calculator runs on today’s.
What most calculators miss
The 3.8% on investment income
Above $200,000 of modified AGI single, $250,000 joint and $125,000 married filing separately, taxable interest and money market dividends pay another 3.8%. Muni dividends don’t. The thresholds are set in the law and don’t rise with inflation. With your cash, the calculator counts only the part of the interest that lands above the line.
California, Connecticut and New York
These three let a fund’s U.S. government income through only if at least half the fund is U.S. government debt at the end of every quarter. VMFXX, VMRXX and VUSXX all met that in 2025. Every other state with an income tax lets the share through whatever the fund holds.
New York City
The city taxes interest the way the state does: Treasury income is free of it, New York munis are free of it, and other states’ munis are taxed. At the top of the city’s brackets that is 3.876% on top of the state.
Last year’s shares
How much of a government fund’s income was U.S. debt is published each January for the year before. The calculator uses the latest: 66.6% for VMFXX, 69.6% for VMRXX and 100% for VUSXX for 2025.
What isn’t counted
Some muni funds hold bonds whose interest counts for the alternative minimum tax, which few people now pay. The national muni fund’s small share from your own state’s bonds is treated as taxed, so it looks slightly worse than it is. State tax isn’t taken off your federal return: with the SALT cap, it rarely is for anyone this matters to.
Checked on September 30, 2026 against Net investment income tax, Instructions for Form 8960, Vanguard, U.S. government obligations income information for 2025, ICI, state taxation of dividends from federal obligations (2023), ICI, state taxation of state and local obligations (2023), Rev. Proc. 2025-32, Ohio LSC, H.B. 96 tax analysis as enacted and Vanguard's daily 7-day SEC yields. An estimate for your records, not tax advice.
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Put more back in your pocket.
Reimburse tells you when a different fund starts paying you more, and prices every receipt in what it puts back.