PRINT
EMAIL
COMMENT
BUZZ UP
DIGG THIS- Ask Kim - Convert Now to a Roth IRA?
- Stock Watch - Five Stocks With Super Yields
- Fund Watch - A Disastrous Year for the Kiplinger 25
- Starting Out - 12 Things I'm Thankful For
- Value Added - Oil Stocks Will Bounce Back
- Cash in Hand - It's Time to Buy Bonds
- Money Smart Kids - Open a Low-Risk College Fund
- Drive Time - Should You Buy a Detroit Car?
- On the Job - 13 Hot Jobs in Hard Times
- More
 MORE TAX IDEAS | |||
For more tax answers, watch Kevin McCormally's "Tax Tips" segment on Nightly Business Report every Monday in March as well as April 10 through 14 on your PBS station. |
Most investors in U.S. government securities -- such as Treasury notes and bonds and U.S. savings bonds -- know that the interest earned is tax-free on their state returns.
It's important to realize that some income paid by mutual funds gets this state-income-tax break, too. Ignore it and you'll pay too much to your state treasury.
Some money market mutual funds invest heavily in U.S. government obligations, so a substantial portion of the income they pay during the year is state tax-free. Some bond funds invest solely in U.S. government securities, so all of their income dividends are state tax-free.
You can eve get state-income-tax-free income from stock mutual funds. Why? Because the portion of the fund's assets held in cash may be invested short-term in government obligations. The interest earned -- and passed on to shareholders -- may be state tax-free.
Your funds should have advised you what portion of your income dividends may be state tax-free. That valuable information doesn't come on the 1099-DIV form that reports income but in a separate document. Check your records or call the fund's toll-free number for details.
Reprint Article
