Best Treasury Money Market Funds 2026, State-Tax-Exempt Cash
Quick take: If you live in California, New York, New Jersey, Massachusetts, Oregon, or any other high-state-tax state, a Treasury-only money market fund is almost always the highest after-tax MMF choice your brokerage offers. The state-tax exemption on direct U.S. Treasury obligations is worth 30-50 bps of effective after-tax yield for a 9-13% state-bracket resident, more than the typical spread between the top headline-yielding MMFs.
| Fund | 7-day yield | Source, as of |
|---|---|---|
| Vanguard Treasury Money Market (VUSXX) | 3.76% | vanguard.com, 09/24/2026 |
| Schwab U.S. Treasury Money Fund (SNSXX) | 3.51% | schwabassetmanagement.com, 09/25/2026 |
| Fidelity Treasury Money Market (FZFXX) | 3.49% | fidelity.com, 09/24/2026 |
| Fidelity Treasury Only (FDLXX) | 3.45% | fidelity.com, 09/24/2026 |
| Vanguard Federal Money Market (VMFXX), government fund for comparison | 3.74% | vanguard.com, 09/23/2026 |
Yields change daily. The BlackRock and Federated Hermes Treasury funds listed in the June version were not re-checked and have been removed from the table.
Money market fund vs MYGA, after tax
What $100,000 earns in 5 years: money market fund vs MYGA, after tax
Rates used: Money market fund 3.76%, the highest 7-day yield we tracked (VUSXX, fund sites, September 23, 2026); yields change daily; change it to the rate you are offered. MYGA 5.95%, the best A-rated rate we track as of October 13, 2026: Delaware Life Pinnacle Plus 5-year (AM Best A-, negative outlook, 7/31/2026), $100,000 and up, effective October 6, 2026 (Delaware Life rate sheet).
| Money market fund, interest taxed every year | $115,550 |
|---|---|
| MYGA, tax-deferred, before tax | $133,507 |
| MYGA after paying tax on all the interest at withdrawal | $126,136 |
| Tax deferral alone adds about | $674 |
| MYGA ahead of the money market fund, after tax | $10,586 |
Assumes 22% federal and 0% state income tax, no withdrawals, rates held for the whole term. MYGA interest is taxed as ordinary income when you withdraw it, not as capital gains. Gains taken before age 59 1/2 can owe a 10% IRS penalty, and cashing out early can cost a surrender charge. In an IRA both grow tax-deferred, so the edge there is the rate alone. A MYGA is backed by the issuing insurer's claims-paying ability and your state's guaranty association up to its limits, not the FDIC. General education, not tax, legal or financial advice.
Top Treasury-only money market funds 2026
| Rank | Fund | 7-Day Yield | Expense | Min | Why it's on the list |
|---|---|---|---|---|---|
| 1 | Vanguard Treasury Money Market (VUSXX) | 3.76% (09/24/2026) | 0.07% | $3,000 | Lowest expense in the group; substantial state-tax exemption. |
| 2 | Schwab U.S. Treasury Money Fund (SNSXX) | 3.51% (09/25/2026) | 0.34% | $0 | Best Schwab MMF for high-tax-state residents. |
| 3 | Fidelity Treasury Money Market (FZFXX) | 3.49% (09/24/2026) | 0.42% | $0 | Common Fidelity core option with heavy direct-Treasury holdings. |
| 4 | Fidelity Treasury Only (FDLXX) | 3.45% (09/24/2026) | 0.42% | $0 | Cleanest exemption disclosure; $0 minimum; inside Fidelity. |
Rates expire like milk.
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Why Treasury MMFs win on after-tax yield in high-tax states
Under federal law, interest on direct U.S. Treasury obligations is exempt from state and local income tax. Treasury-only MMFs hold direct T-bills and short T-notes, typically 95-100% of dividends qualify for the state-tax exemption.
For a Californian in the 9.3% state bracket holding $250,000 in VUSXX (3.76%, 09/24/2026) vs. VMFXX (3.74%, 09/23/2026), assuming ~55% of the government fund's dividends qualify for the exemption:
| Calculation | Treasury MMF (VUSXX) | Government MMF (VMFXX) |
|---|---|---|
| Headline yield | 3.76% | 3.74% |
| Annual income on $250K | $9,400 | $9,350 |
| % qualifying for state-tax exemption | ~98% | ~55% |
| State-taxable portion of income | $188 | $4,208 |
| CA state tax @ 9.3% | $17 | $391 |
| After-state-tax income | $9,383 | $8,959 |
| After-state-tax effective yield | 3.75% | 3.58% |
The Treasury MMF wins by about 17 bps on this comparison. In years when the government MMF qualifies for less of the exemption (because it leans more on repo), the spread widens to 15-25 bps in favor of the Treasury fund.
2025 state-tax percentages for every fund on this list
A Treasury name does not settle the state-tax question. What counts is the percentage each fund company publishes after year-end, and, in California, Connecticut and New York, whether the fund met those states' minimum: at least 50% of its assets in U.S. government obligations at each quarter-end of the tax year (Vanguard, U.S. government obligations income information, tax year 2025). Here are the actual tax year 2025 figures:
| Fund | 2025 share of dividends from U.S. government obligations | Exempt in CA, CT, NY? | Source |
|---|---|---|---|
| Vanguard Treasury Money Market (VUSXX) | 100.00% | Yes | Vanguard |
| Schwab U.S. Treasury Money Fund (SNSXX) | 99.99% | Yes | Schwab |
| Fidelity Treasury Money Market (FZFXX) | 61.52% | No, fully state-taxable | Fidelity |
| Fidelity Treasury Only (FDLXX) | 98.67% | Yes | Fidelity |
| Vanguard Federal Money Market (VMFXX), the government fund in the example above | 66.61% | Yes | Vanguard |
FZFXX is the trap. It is a Treasury fund by name, but for 2025 Fidelity marked it as not meeting the California, Connecticut and New York minimum, so a resident of those states pays state tax on all of it. Example for a Californian in the California 9.3% bracket (2025 single filer taxable income $72,724 to $371,479, per the FTB 2025 tax rate schedules): $100,000 for one year at the September 24, 2026 yields in the table above (FZFXX 3.49%, FDLXX 3.45%, held constant). FZFXX pays $3,490 in dividends and $324.57 in California tax, leaving $3,165.43. FDLXX pays $3,450, of which 98.67% is California-exempt, so tax is $4.27 and $3,445.73 is left. FDLXX nets $280.30 more despite the lower yield. Residents of most other income-tax states can still exclude FZFXX's 61.52%.
The $250,000 California example above assumes about 55% for VMFXX. Rerun with Vanguard's actual 2025 figure of 66.61% (and 100% for VUSXX), VMFXX's California tax drops to $290.34 and its after-tax income rises to $9,059.66 (3.62%), so VUSXX's after-tax lead is about $340 a year, or 14 basis points, on those same yields.
When a Treasury MMF is NOT the right answer
- No-income-tax states (TX, FL, NV, WA, TN, SD, WY, AK, NH): the state-tax exemption is worth nothing. Pick the highest headline yield in your brokerage.
- Inside an IRA or 401(k): dividends inside a tax-advantaged account aren't currently taxed regardless, so the exemption is irrelevant. Pick the highest headline yield.
- 3+ year money: a Treasury MMF is still the wrong vehicle. The right vehicle for 3+ year money is a locked MYGA or a Treasury ladder. See MMF vs MYGA →
State-by-state exemption notes
- CA, MA, NY, NJ, OR: strict enforcement, the exemption is essentially automatic for direct Treasury interest. Mixed-collateral funds qualify only on the Treasury portion.
- IL, IA, MN: require the fund to hold a minimum percentage (typically 50%) in U.S. government obligations for any of the dividends to qualify for the state-tax exemption. Read the fund's year-end disclosure carefully.
- CT, NH (interest tax): exemption applies the same way as full-income-tax states.
More Money Market Fund research
- Best Money Market Funds 2026 (ranked)
- MMF vs MYGA, when each wins
- MMF vs HYSA, yield spread and risk
- MMF vs CD, liquidity vs lock
- Breaking the buck, 1994 & 2008 cases
- How MMF yields track the Fed funds rate
- High-Yield Savings reviews
- Best MYGA rates 2026
FAQ
Q: How do I know what % of MMF dividends qualified for the state-tax exemption?
A: Every fund publishes a year-end document (often called "U.S. government obligations interest" or similar) showing the percentage of dividends attributable to direct U.S. Treasury obligations. Apply that percentage to your dividend income, exempt that portion from state tax. Your CPA or tax software will handle this automatically if you supply the year-end fund disclosure.
Q: Why are Treasury MMF yields lower than government MMF yields?
A: Treasury-only funds hold a slightly narrower opportunity set (no agency paper, no repo). Headline yield is often a few bps lower than a similar government MMF, though not always: on the late-September 2026 checks VUSXX (3.76%) was slightly above VMFXX (3.74%), while Schwab's SNSXX (3.51%) trailed its government fund SNVXX (3.57%). The state-tax exemption usually more than makes up the difference for high-state-tax residents.
Q: Are Treasury MMFs safer than government MMFs?
A: Marginally, yes, direct Treasury collateral has zero credit risk and zero counterparty risk (vs. repo, which depends on the counterparty's ability to deliver the Treasury collateral if needed). For practical purposes, both are the safest MMF tiers available.
Q: Which Treasury money market funds qualified for the California state-tax exemption for 2025?
A: Of the funds on this page, VUSXX (100.00%), SNSXX (99.99%) and FDLXX (98.67%) met the California, Connecticut and New York minimum for 2025, per each fund company's tax year 2025 document. FZFXX (61.52%) did not, so its dividends were fully taxable in those three states.
Q: Is FZFXX state-tax-exempt in California?
A: Not for 2025. Fidelity reported 61.52% of FZFXX's 2025 dividends came from U.S. government securities, but marked the fund as not meeting the minimum U.S. government holdings California, Connecticut and New York require (Fidelity, 2025 Percentage of Income from U.S. Government Securities). In those states the whole dividend is taxable. FDLXX, at 98.67%, did qualify.
About Hans Goldstein: Independent retirement income specialist. CA Life License #4273294. NPN #20602398. Reviews 30+ carriers and the full menu of cash alternatives. Phone: 213-414-2808. Email: hans@hansgoldstein.com.
Hans is independently licensed as an insurance producer; he does not sell money market funds or other securities. These reviews are based on publicly available fund prospectuses, fact sheets, SEC filings, and SEC-yield reporting requirements.
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Money market funds are great for short-term cash. For money you don't need for 3+ years, a multi-year guaranteed annuity (MYGA) typically pays 100-150 bps more and defers tax. Get an independent side-by-side before you let cash drift in a MMF for 5 years.
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Disclosure
This review reflects publicly available fund prospectuses, fact sheets, and approximate 7-day SEC yields as of the date stated above. Money market fund yields change daily and reset roughly in line with the federal funds rate; always confirm current yield, expense ratio, holdings, and weighted average maturity against the most recent fund disclosure document before committing capital. Money market funds are not FDIC-insured. Government and Treasury money market funds historically maintain a stable $1.00 NAV but are not guaranteed to do so, see "breaking the buck" history. Prime money market funds may impose liquidity fees or redemption gates during market stress. This is general education, not a personal recommendation or an offer of any product. Hans Goldstein is an independent licensed insurance producer (NPN 20602398) and does not sell securities or money market funds; comparisons to multi-year guaranteed annuities (MYGAs) are provided for informational context only. No compensation has been received from any fund company in connection with the publication of this review. Always read the actual fund prospectus and consult a licensed advisor before investing. Past yield does not predict future yield. State income tax treatment of U.S. Treasury obligations varies and is subject to change. Tax discussion reflects federal and California law as of 2026 and is subject to change.