VUSXX vs VMFXX: 100% vs 66.61% state tax exempt for 2025, and which keeps more in all 50 states

Both are Vanguard government money market funds with a $1.00 share price and a $3,000 minimum. The difference that matters for tax: Vanguard reports that 100% of Vanguard Treasury Money Market Fund's (VUSXX) 2025 dividends came from U.S. government obligations, against 66.61% for Vanguard Federal Money Market Fund (VMFXX), the fund your Vanguard brokerage cash sits in by default. Both met the 50% test that California, Connecticut and New York require. At the yields Vanguard showed for October 16, 2026, VUSXX 3.89% and VMFXX 3.82%, VUSXX keeps more in all 50 states and D.C. for our example filer: $28.36 more a year on $50,000 where dividends are not taxed, and up to $88.79 more in California.

• Where the gap comes from. Part of it is the yield (3.89% against 3.82%), which applies everywhere. The rest is state tax on the 33.39% of VMFXX's dividends that did not come from U.S. government obligations. Vanguard's own note on VMFXX: “This fund may earn income from investments in repurchase agreements and certain other securities that are generally subject to state and local taxes.”
• The yield VMFXX would need. To keep as much as VUSXX at 3.89%, VMFXX would need a 7-day yield of about 3.89% in a state without income tax and 4.05% in California, for this filer. The last columns of the state table give the figure for every state.
• Convenience is the other side. VMFXX is the settlement fund: in Vanguard's words, settlement fund “refers to the sweep program option used to pay for and receive proceeds from trades”. VUSXX is a separate purchase, and money moves through the settlement fund on its way in and out.
• Costs. Expense ratios of 0.07% (VUSXX) and 0.11% (VMFXX); the yields are already net of them.

VUSXX and VMFXX side by side

VUSXX vs VMFXX after tax in all 50 states and D.C.

The yield left after federal and state income tax for a single filer aged 35 with $90,000 of wages and $50,000 in the fund for a year, at the yields above. “Keeps more” is the dollar difference over a year on $50,000. “Break-even” is the 7-day SEC yield VMFXX would need to keep as much as VUSXX at 3.89% in that state, for this filer.

VUSXX keeps more in all 50 states and D.C. at these yields. The gap is smallest where only the yields differ ($28.36 a year in Texas) and largest in California, Oregon and Maine; in the 36 states that exempt each fund's share it runs from $41.03 to $85.22.

California, Connecticut and New York

These three states exempt a fund's U.S. government share only if the fund held at least 50% of its assets in U.S. obligations at the end of every quarter. Both Vanguard funds passed for 2025, so VMFXX's 66.61% is exempt there as in most states. For a single filer aged 35 with $90,000 of wages and $50,000 in the fund for a year, VMFXX's dividends add $60.44 to California tax and VUSXX's $0.00; in New York the figures are $38.34 and $0.00, in Connecticut $35.74 and $0.00. Passing is not automatic: Fidelity's Government (SPAXX) and Treasury (FZFXX) money funds missed the test for 2025, which makes all of their dividends taxable in these states (see Is SPAXX state tax exempt?).

Quick answers

Is VUSXX better than VMFXX?

For what is left after tax, at the Oct. 16, 2026 yields VUSXX kept more in every state for our example, by $25.26 to $88.79 a year on $50,000. Which keeps more always depends on two things: the gap between the two 7-day yields that day, and how much of VMFXX's dividends your state taxes. Where dividends are not taxed, the higher yield wins; in a high-tax state VMFXX needs a higher yield than VUSXX to keep as much. VMFXX's advantage is that it is the settlement fund. Which suits your cash is your decision.

Is VUSXX state tax exempt? Is VMFXX?

Not entirely, and only from state tax. Vanguard's 2025 figures: 100% of VUSXX's dividends and 66.61% of VMFXX's came from U.S. government obligations. In 36 states that share is exempt; in California, Connecticut and New York it is exempt because both funds met the 50% test; 9 states do not tax dividends. The District of Columbia, Hawaii and Kentucky have no rule we found that extends the exemption to fund dividends. Federal tax applies in full; IRS Publication 550: “Report amounts you receive from money market funds as dividend income.”

VUSXX vs VMFXX yield: which pays more?

On October 16, 2026 Vanguard showed a 7-day SEC yield of 3.89% for VUSXX and 3.82% for VMFXX. The order can change from week to week. Vanguard's expense ratios, as of December 19, 2025, are 0.07% and 0.11%.

Is VMFXX Vanguard's settlement fund?

Yes. Vanguard's 2025 tax document says VMFXX's figure “applies to the Vanguard Federal Money Market Settlement Fund”, and Vanguard describes its FDIC-insured Cash Deposit as an “alternative settlement fund option to Vanguard Federal Money Market Fund”. VUSXX is bought separately.

Did VUSXX and VMFXX meet California's 50% test?

Yes, both, for 2025. Vanguard marks each as a fund that “meets the threshold requirements for California, Connecticut, and New York”. The test is applied each year; the 2026 result comes with Vanguard's document for 2026, usually in January.

Does VUSXX hold anything states tax?

Vanguard says VUSXX “generally invests 100% of its assets in U.S. Treasury securities and in repurchase agreements fully collateralized by U.S. Treasury securities”, and notes: “Income generated from investments in repurchase agreements with the federal reserve are generally subject to state and local income taxes.” For 2025, Vanguard still reported 100.00% of VUSXX's dividends as U.S. government income. Use the figure for the year on your return.

How we built this page

• The yields, expense ratios, minimums and fund descriptions are the sponsors' own pages, read October 17, 2026. To keep the comparison fair, both yields are each fund company's latest figure.
• The 2025 shares and 50% test results are the sponsors' 2025 tax documents. Schwab's is a PDF on a server whose robots.txt closes it to automated reading; we read it on September 22, 2026 and quote nothing from it.
• Each state's rule comes from its own instructions, regulations or statutes, listed in our calculator's table of state rules. The after-tax figures come from the reference code that produces the calculator's published test cases.
• For twelve funds from five sponsors side by side, see state tax exempt money market funds; for Fidelity's core fund, Is SPAXX state tax exempt?; for SGOV in every state, Is SGOV state tax exempt?

Rechecks and changes

We will update the 2025 shares when the sponsors publish their 2026 documents, usually in January or February, and the yields every month.

• October 19, 2026. First published.

Sources: Vanguard, 2025 U.S. government obligations information (January 2026); Vanguard, VUSXX fund profile; Vanguard, VMFXX fund profile; Vanguard, Vanguard Cash Deposit; IRS, Publication 550 (2025); each state's source is in our calculator's table of state rules. Dollars Ahead is not affiliated with Vanguard or any state. This page reports what the funds and states publish. It is not tax or investment advice.