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Compare tax efficiency of diff etfs, mf
Old 07-12-2015, 11:29 AM   #1
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Compare tax efficiency of diff etfs, mf

I have a large position of MUB (muni trust) which I was thinking to reinvest into Vanguard California Intermediate-Term Tax-Exempt Fund Admiral Shares (VCADX).

And got myself puzzled - which one is better, more "tax free" (what is the difference in between "ATM tax exempt" vs "Federal and CA tax exempt" ?) and tax efficient ?

In a process I found this calculator, which I am sure will be helpful to the readers of this forum and share it here - https://www.dividendchannel.com/drip...ns-calculator/

But still need help to compare MUB vs VCADX. Any help is appreciated (assuming high income bracket in CA say ~300K).
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Old 07-12-2015, 01:25 PM   #2
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Obviously you have more faith in the governments of California than I do. Remember Stockton!
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Old 07-12-2015, 01:43 PM   #3
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I can't add much except that I had about $150K in MUB for awhile, until I recently chose to roll that into a colorado municipal bond fund (WTCOX) that provided both federal and state tax free income. I feel pretty good about colorado bonds, given the state's overall financial situation, but I can't say the same for california. My assumption is that the risks associated with CA bonds would be compensated by higher yield, but I'm not seeing that in VCADX - it looks like the SEC yield is actually lower than what I'm getting.
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Old 07-12-2015, 05:40 PM   #4
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How did you compare ATM exempt vs fed and state exempt of your positions? Which one was found to be more efficient?
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Old 07-13-2015, 03:23 AM   #5
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Originally Posted by hesperus View Post
I can't add much except that I had about $150K in MUB for awhile, until I recently chose to roll that into a colorado municipal bond fund (WTCOX) that provided both federal and state tax free income. I feel pretty good about colorado bonds, given the state's overall financial situation, but I can't say the same for california. My assumption is that the risks associated with CA bonds would be compensated by higher yield, but I'm not seeing that in VCADX - it looks like the SEC yield is actually lower than what I'm getting.

Been considering Colorado muni bonds. Not likely to go up in smoke ....
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Old 07-13-2015, 08:00 PM   #6
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My research shown that -
MUB - Fed, AMT exempt
VCADX - Fed, CA and AMT exempt
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Old 07-13-2015, 10:53 PM   #7
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Originally Posted by wanaberetiree View Post
And got myself puzzled - which one is better, more "tax free" (what is the difference in between "ATM tax exempt" vs "Federal and CA tax exempt" ?) and tax efficient ?
Munies can have some of their payments taxed via AMT if they are 'private activity'. This won't matter to you unless you file form 6251 with your taxes. It's likely the amounts you would be taxed if if you are subject to AMT would be a small portion of the payment. Mine were with HYD for example. If your not subject to AMT you get a better return on bonds that are subject to it.
If you live in CA then MUB isn't suitable because they will tax bonds except CA and Puerto Rico (maybe some others). So VCAD probably best for CA residents.
So it all depends.
I missed this bit at first:
Quote:
Originally Posted by wanaberetiree View Post
(assuming high income bracket in CA say ~300K).
Your best investment might actually be u-haul. I can't imagine having a high income in CA. At least WA leaves me alone even if the Feds don't. So probably VCAD or some other CA tax free muni fund is better for you.
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Old 07-13-2015, 11:45 PM   #8
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I don't know about MUB. But we are CA residents and we have a large position in VCADX (and until recently we had a high income). We had to pay the AMT in 2013, but not in 2014. In both cases, we owed nothing on the income from VCADX either to the Feds or the state.
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