| A possible solution to ease one's tax burden is to | | | | because it invests in securities that are exempt |
| opt for money market funds over money | | | | from federal as well as local taxes. |
| market accounts. Though money market | | | | When we talk about an account being tax free, |
| accounts generally return a good interest rate on | | | | we are referring to the dividends that the fund |
| your invested principal, money market funds help | | | | pays out and not the initial principal. That money |
| minimize taxes and further increasing capital | | | | is still subject to taxes, but all dividends earned on |
| appreciation. | | | | that money is tax free. |
| If your situation is one where you are stuck | | | | The interest rate a money market fund pays is |
| paying high state taxes but are in low federal tax | | | | dependent on the exact securities that the |
| bracket, certain money market funds can help | | | | institution invests in. Most financial institutions |
| you. Money market funds made up of U.S. | | | | invest into the same basic types of securities, |
| Treasury bonds, such as the Vanguard Money | | | | often bonds, and therefore the interest rate |
| Market Reserve U.S. Treasury Portfolio, can help | | | | usually vary only slightly. |
| you alleviate some of the burden caused by high | | | | If your tax situation is a primary investment |
| state taxes. | | | | concern, consider switching from a standard |
| Several brokerages also offer funds that are | | | | money market account to something better |
| exempt from taxes at both the state and federal | | | | suited to tax management, money market |
| levels. One example is the Fidelity Spartan | | | | funds. You work hard for your money. Why |
| Money Market Fund. This fund is possible | | | | not do all you can to keep it for yourself? |