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