Prime vs government money market funds after tax
Averages of the retail share classes in the data, 7-day yields as filed for October 29, 2026. Not investment advice.
Example result
SPRXX after federal and California tax
2.43%
$1,214 a year kept on $1,820 of dividends
| Dividends before tax | $1,820 |
| Federal tax at 24.0% | −$437 |
| State tax at 9.30% fund missed the 50% rule: all of it taxed | −$169 |
SPAXX after federal and California tax
2.60%
$1,301 a year kept on $1,775 of dividends
SPAXX leaves $87 more a year than SPRXX.
Yield reported by the fund for October 29, 2026; yields change daily. Estimate, not tax or investment advice. Nothing you type leaves your browser. How it is computed
A small premium, taxed in full by states
The case for a prime fund is a higher yield for a little more credit risk. In the data behind this site there was no premium at all on average. The 28 retail prime share classes averaged a 7-day net yield of 3.58%, against 3.59% for the 160 government classes and 3.65% for the Treasury-only ones: simple averages, one figure per class, so a few expensive classes pull each average down. State tax then works against the prime funds, because almost none of their income comes from obligations that states may not tax. Averaged the same way for a single Californian with $120,000 of income, prime classes left 2.39% after tax and government classes 2.53%; in Texas, with no income tax, 2.72% and 2.73%. A government fund in California, Connecticut or New York keeps its edge only if it passed the 50% quarter-end test, which many did not. The calculator compares any two funds in the data; it starts with Fidelity’s prime fund SPRXX against its government fund SPAXX.
Average yield by fund type, before and after tax
| Type | Classes | Gross | Net, as filed | After tax, CA | After tax, TX |
|---|---|---|---|---|---|
| Prime | 28 | 4.10% | 3.58% | 2.39% | 2.72% |
| Government | 160 | 3.99% | 3.59% | 2.53% | 2.73% |
| Treasury | 37 | 3.99% | 3.52% | 2.42% | 2.67% |
| Treasury only | 24 | 4.00% | 3.65% | 2.77% | 2.77% |
Simple averages over share classes; single filer, $120,000 of taxable income; exempt share estimated from holdings.
Questions about this page
Tap a question to see the answer.
What is a prime money market fund?
A fund that may hold, besides government securities, short-term debt of banks and companies: commercial paper, certificates of deposit, and repo backed by collateral other than government securities. Rule 2a-7 limits its maturity and credit quality. Retail prime funds keep a $1.00 share price; institutional prime funds float their price.
Why do prime funds not pay much more than government funds?
On the filed data the average gross yield, before expenses, was 4.10% for prime funds and 3.99% for government funds. Short bank and company paper pays only slightly more than Treasury bills in calm markets, and some retail prime classes carry higher expenses, which narrows the gap further.
Can a prime fund charge a fee to sell?
A retail prime fund may impose a discretionary liquidity fee of up to 2% if its board decides it is in the fund’s interest. Government funds are not required to have fees. Institutional prime funds face a mandatory fee when daily net redemptions exceed 5% of assets, under the 2023 amendments to rule 2a-7.
Other pages
Filings, rules and tax schedules behind this page
- Securities and Exchange Commission, Form N-MFP data sets (monthly, as filed)
- 17 CFR 270.2a-7, money market funds (rule 2a-7)
- California Franchise Tax Board, 2025 Schedule CA (540) instructions: funds with 50% of assets in U.S. or California obligations
- IRS Revenue Procedure 2025-32, 2026 tax rate tables
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