Money market fund vs high-yield savings, after tax
Type the rate your bank pays (its APY, annual percentage yield) and see whether a Treasury money fund would leave you more after tax. Fund yield as reported for October 30, 2026. Not investment advice.
Example result
VUSXX after federal and California tax
2.96%
$1,478 a year kept on $1,945 of dividends
| Dividends before tax | $1,945 |
| Federal tax at 24.0% | −$467 |
| State tax at 9.30% $1,945 of the $1,945 is free of California tax | −$0 |
Savings account after federal and California tax
2.62%
$1,308 a year kept on $1,961 of interest
Your 4.00% APY counts here as 3.92% a year: an APY includes interest earned on interest, a fund’s 7-day yield does not. So VUSXX shows the same figure as in every ranking on this site.
VUSXX leaves $170 more a year than a savings account.
Yield reported by the fund for October 30, 2026; yields change daily. Estimate, not tax or investment advice. Nothing you type leaves your browser. How it is computed
The rate to beat is higher than it looks
Savings account rates and money fund yields are quoted in nearly the same way, an annual percentage, so the temptation is to compare them directly. Tax gets in the way. Interest from a bank is taxed by your state in full. Dividends of a fund that holds only Treasury securities are not taxed by any state, because federal law bars states from taxing interest on U.S. obligations and funds pass that exemption to shareholders. A savings account therefore has to pay more than a Treasury fund just to break even after tax, and how much more depends on your state rate. The table below runs that break-even for a single filer with $120,000 of taxable income against Vanguard Treasury Money Market (VUSXX), which filed a 7-day yield of 3.89%. An APY counts interest earned on interest and a 7-day yield does not, so the comparison is made on the same basis and the answer is given back as an APY, the rate your bank advertises. In Texas, with no income tax, the answer is simply the fund’s yield expressed as an APY, 3.97%. In California the account needs noticeably more. The calculator above lets you type the APY you were offered, pick any fund, and see the dollar difference on your balance. Remember that an advertised APY can be a promotional rate that falls after a few months, and a fund yield also moves with every change in short-term rates.
Safety first. A savings account at a bank is insured by the FDIC (the U.S. agency that insures bank deposits) up to $250,000 per depositor, per bank. A money market fund is not a bank account and is not insured; a Treasury fund holds short U.S. Treasury debt and aims to keep each share at $1.00. What protects it instead: under the SEC’s rule 2a-7, a fund may hold only short, high-quality debt, with an average maturity of 60 days at most, and must keep at least a quarter of its money in cash or assets it can turn into cash within one business day. A government fund keeps at least 99.5% in cash, U.S. government securities and loans backed by them. These limits are not a guarantee: a fund can still lose money.
APY a savings account must pay to match VUSXX after tax
| State | Break-even APY | Extra the bank must pay before tax, on $50,000 |
|---|---|---|
| California | 4.53% | $271 |
| New York | 4.31% | $167 |
| New Jersey | 4.34% | $178 |
| Illinois | 4.25% | $136 |
| Pennsylvania | 4.14% | $82 |
| Texas | 3.97% | $0 |
Single filer, $120,000 of taxable income, VUSXX at its filed 7-day yield (3.89%), savings interest fully taxable by the state. The last column is how much more interest a year, before tax, the savings account pays than the fund at that rate: the state tax takes it back.
Questions about this page
Tap a question to see the answer.
Is a money market fund the same as a money market account?
No. A money market account is a bank deposit, insured by the FDIC up to the legal limit, with a rate the bank sets. A money market fund is a mutual fund that holds short-term debt, is not insured, and pays dividends. Both are called money market, which causes most of the confusion.
Is savings account interest taxed by my state?
Yes. Bank interest is fully taxable by every state with an income tax, unlike interest on U.S. Treasury obligations. That is why a Treasury money fund can leave more after tax than a savings account paying a higher rate, as the table on this page shows for six states.
Which is safer, a savings account or a Treasury money fund?
A savings account is insured by the FDIC up to $250,000 per depositor, per bank, per ownership category. A Treasury money fund is not insured; it holds short Treasury debt and aims to keep a $1.00 share price, which rule 2a-7 supports but does not guarantee. The kinds of risk differ.
Other pages
Filings, rules and tax schedules behind this page
- Securities and Exchange Commission, Form N-MFP data sets (monthly, as filed)
- IRS Revenue Procedure 2025-32, 2026 tax rate tables
- California Franchise Tax Board, 2025 California tax rate schedules
- New Jersey Division of Taxation, 2025 NJ-1040 instructions and tax rate schedules
- 17 CFR 270.2a-7, money market funds (rule 2a-7)
Compiled by Radif Partners
Independent publisher of money market fund yield and after-tax calculators built on Form N-MFP filings
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Fund data as filed for 2026, site checked on