Updated October 23, 2026 from live rates
Municipal money market vs taxable money market: which keeps more after tax?
At today's rates, Treasury fund keeps more after tax in all 9 tax scenarios below, by about $252 to $2,029 a year on $500,000.
After-tax yield by tax situation
Yield you keep after federal and state income tax, at today's rates. The last column is the yearly gap between the best and second-best on $500,000. The 3.8% net investment income tax is left out; it lowers every taxable option by the same share.
| Federal bracket, state tax | Muni fund | Treasury fund | Prime fund | Yearly gap |
|---|---|---|---|---|
| 24%, no state tax | 1.45% | 2.88% | 2.82% | $304 |
| 24%, 5% state | 1.38% | 2.88% | 2.63% | $1,231 |
| 24%, 9.3% state | 1.32% | 2.88% | 2.47% | $2,029 |
| 32%, no state tax | 1.45% | 2.58% | 2.52% | $272 |
| 32%, 5% state | 1.38% | 2.58% | 2.34% | $1,200 |
| 32%, 9.3% state | 1.32% | 2.58% | 2.18% | $1,997 |
| 37%, no state tax | 1.45% | 2.39% | 2.34% | $252 |
| 37%, 5% state | 1.38% | 2.39% | 2.15% | $1,180 |
| 37%, 9.3% state | 1.32% | 2.39% | 1.99% | $1,977 |
What's different
| Muni fund | Treasury fund | Prime fund | |
|---|---|---|---|
| What it is | Municipal money fund (not your state's)FFTXX, Federated Hermes Institutional Tax-Free Cash Trust, on Merrill | Treasury-only money fundFSIXX, Fidelity Treasury Only Portfolio, on Merrill | Prime money fundSWVXX, Schwab Prime Advantage Money Fund |
| Rate today | 1.45%7-day yieldVerified October 20, 2026 | 3.79%7-day yieldVerified October 20, 2026 | 3.71%7-day yieldVerified October 21, 2026 |
| Getting your money | Next business day | Next business day | Next business day |
| Protection | Money market fund, not FDIC-insured | Money market fund, not FDIC-insured | Money market fund, not FDIC-insured |
| State income tax | Federally exempt; usually state-taxable | Exempt | Fully taxable |
Municipal money funds pay less but their income is exempt from federal tax. Income from bonds issued outside your own state is usually still state-taxable; we assume that here. They tend to win only in the top federal brackets.
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