VMFXX (Vanguard Federal Money Market Fund) Taxes in TurboTax

[Michael16]

How do I enter taxes for dividends received from Vanguard's Federal Money Market Fund in TurboTax?

Taking 2024 as an example, my 1099-DIV lists U.S. obligations as 59.87% for the fund. Do I simply multiply total ordinary dividends (line 1a on 1099-DIV) by this percentage before entering into TurboTax?

How does this carry over to state tax forms (I live in the state of Georgia)?

[M-MTax]

You don't have to be concerned with the federal side of this because interest from obligations of the federal government is fully taxable by the federal government.

Re the State of Georgia, interest from federal government securities are exempt from state taxation but you may have to enter that in the State section of the program. You should also note that some states make a distinction (or have made one in the past) between dividends paid out of a mutual fund and interest paid directly from the federal government (e.g., where you would directly own U.S. Treasuries).

[SteamTrain]

The Tax software does have a follow-up page right after the entry of the main 1099-DIV data in the Federal section, where you indicate how much of box 1a was due to US Govt bonds.

You calculate that from the %% that Vanguard provides, but you calculate it directly from box 1a ONLY if that Vanguard fund is the only source of $$ in box 1a.  If other funds or stocks are including $$ in box 1a, then you have to get the $$ just from VMFXX from one of the Vanguard supplemental data sheets to calculate the appropriate $$ amount.   Then that amount should automatically be subtracted in the GA tax forms.   (at least it does in the NC tax forms every  year).

[Michael16]

The total dividends listed on line 1a include both U.S government obligations and ordinary dividends, so wouldn't only the U.S. government obligations be taxable on my federal return?

For example, if total dividends are $10,000, and the U.S government obligation percentage is 59.87%, wouldn't only $5,987 be taxable at the federal level? Or is the entire amount $10,000 taxable on my federal return?

[Mike9241 · Accepted solution]

all the dividends are taxable at the federal level. assuming all the US interest qualifies for state subtraction purposes you would get a deduction on your state income tax return for the amount. when you go through Turtbotax's entries for the dividend amount you should be asked about US Gov't interest. if you have no state income taxes the number is meaningless. 

[M-MTax]

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@Michael16 wrote:

.....is the entire amount $10,000 taxable on my federal return?

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The entire amount is taxable at the federal level.