TLDR
Looking for Vanguard funds that allow us to avoid federal taxes (exempt). These look like best candidates.
DETAILS: Outline to try to make it faster and easy to read/scan.
Situation:
Looking for Vanguard funds that allow us to avoid federal taxes (exempt). These look like best candidates.
- VWALX Vanguard High-Yield Tax-Exempt Fund Admiral Shares
- VMSXX Vanguard Municipal Money Market Fund
DETAILS: Outline to try to make it faster and easy to read/scan.
Situation:
- S1) Want to continue to stay under 400% ACA FPL for a couple more years so we need to manage our taxable income.
- S2) Planning some tax ramifications of
- a) selling our IL home,
- b) putting the ~$450K+ proceeds somewhere to earn something for a few years, and
- c) build future long term NC home
- T1) move ~$450K+ to HYSA (Ally 4.35% currently). Aside: Joint acct allows $500K FDIC insured
- T2) this generates $1500 monthly interest (before taxes) which help pay for some of the monthly rent
- P1) the ~$1500+ per month federally taxable interest that at year-end would likely put us over the 400% ACA FPL limit
- M1) move some of the ~$450K+ in the HYSA (Ally 4.35% currently)
- >> M2) move remainder to 1+ Vanguard funds that are entirely (mainly with best guess % - ie. 80%) federally tax exempt
- F1) VWALX Vanguard High-Yield Tax-Exempt Fund Admiral Shares; 7.36% YTD after tax
URL: https://investor.vanguard.com/investment-products/mutual-funds/profile/vwalx
Fuzzy text: "This low-cost municipal bond fund seeks to provide a high level of federally tax-exempt income and typically appeals to investors in higher tax brackets." - F2) VMSXX Vanguard Municipal Money Market Fund; 3.06% YTD after tax
URL: https://investor.vanguard.com/investment-products/mutual-funds/profile/vmsxx
Fuzzy text: "Investors in a higher tax bracket who have a short-term savings goal and seek a competitive tax-free yield may wish to consider this option." - F3) Ally taxes: 4.35% * (100%-12%); 3.83% after tax
- T1) This document does say 100% - "Federal tax treatment. The tax-exempt interest dividends are 100% exempt from federal income tax"
and in Table 2 (page 2) it includes columns for 'Municipal Money Market Fund' & 'High-Yield Tax-Exempt Fund' implying that this document is relavent to both of those F1 & F2 funds (?)
Title: Income by state for Vanguard municipal bond funds, Tax-Managed Balanced Fund (PDF)
URL: https://personal1.vanguard.com/pdf/INBST_2023.pdf - T2) This document I thought would be the go to for federal tax % exemption but I don't see those funds:
Title: U.S. government obligations income information
URL: https://personal1.vanguard.com/pdf/USGOIN_2023.pdf