CA state tax exempt interest from U.S. obligations in a mutual fund
Vanguard says 64% of vmrxx interest income is from federal obligations. It breaks that down further into 29% U.S. Treasury and 34% Fed Home Loan.
Is 0%, 29%, or 64% of the interest income state tax free in California?
I’m obviously overthinking this, but I’m more academically interested in the answer at this point!
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Case for 64%:
“If mutual fund (it is) is >50% U.S. or State municipal obligations, enter the amount of tax-exempt interest dividends that are attributed to U.S. obligations”
Vanguard also shared this document specifically stating that this fund meets the 50% requirements and gives instructions to use 64% exempt as a percentage.
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Case for 28%:
CA does not consider Federal Home Loan Mortgage Program as U.S. obligations, leaving only the 28% paid to U.S. Treasury
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Case for 0%:
Since CA doesn’t count Federal Home Loan as a U.S. obligations, then VMRXX mutual fund has <50% of its interest from U.S. obligations and the interest is therefore not statetax exempt.
Vanguard says 64% of vmrxx interest income is from federal obligations. It breaks that down further into 29% U.S. Treasury and 34% Fed Home Loan.
Is 0%, 29%, or 64% of the interest income state tax free in California?
I’m obviously overthinking this, but I’m more academically interested in the answer at this point!
—
Case for 64%:
“If mutual fund (it is) is >50% U.S. or State municipal obligations, enter the amount of tax-exempt interest dividends that are attributed to U.S. obligations”
Vanguard also shared this document specifically stating that this fund meets the 50% requirements and gives instructions to use 64% exempt as a percentage.
—
Case for 28%:
CA does not consider Federal Home Loan Mortgage Program as U.S. obligations, leaving only the 28% paid to U.S. Treasury
—
Case for 0%:
Since CA doesn’t count Federal Home Loan as a U.S. obligations, then VMRXX mutual fund has <50% of its interest from U.S. obligations and the interest is therefore not statetax exempt.