What Percent of SGOV Is State Tax Exempt? 2025 Figures for SGOV, VBIL, USFR, SPAXX and More

Interest on U.S. Treasury securities is exempt from state and local income tax. When a fund holds Treasuries and passes that interest through as dividends, most states let you exclude the part of the dividend that came from government obligations. Each fund sponsor publishes that share once a year, usually in January or February, for the tax year just ended.¹²³

Two numbers decide what you can exclude. The first is the fund’s percentage. The second is a yes-or-no test that only matters if you live in California, Connecticut or New York.

2025 state-exempt percentages for common cash funds

Every figure below is the sponsor’s own tax-year 2025 number. “Meets CA/CT/NY test” means the sponsor marked the fund as holding at least 50% of its assets in government obligations at the end of each quarter.

The pattern follows what each fund is allowed to hold. Funds that buy only Treasury bills or notes sit near 100%. Government money market funds such as SPAXX and VMFXX can also hold repurchase agreements, and their percentages fall to between one-half and two-thirds. A prime fund such as SPRXX holds mostly corporate paper and bank obligations, so little of its income qualifies.

How the 50% rule in California, Connecticut and New York works

California’s statute lets a fund pass through state-exempt dividends only if, at the close of each quarter of its taxable year, at least 50% of the value of its total assets consists of obligations whose interest California would not tax.⁵ Connecticut and New York apply the same threshold, and Vanguard and Fidelity both describe the three states together in their supplements.²³

The test is all or nothing. A fund that misses it at any quarter end passes through no exempt income to residents of those three states, whatever its annual percentage says. SPAXX reported 50.90% of its 2025 income from government obligations and failed the test, so a California resident owes state tax on all of it. FZFXX failed at 61.52%. VMFXX passed at 66.61%, which is why a California investor at Vanguard can exclude two-thirds of the settlement fund’s income while one at Fidelity excludes nothing from the default core position.

Outside those three states, most income-tax states exempt the share of a fund’s dividends that came from U.S. government securities with no asset threshold.³ A SPAXX holder in a state that follows that approach can exclude 50.90% of the dividends.

A worked example with $1,000 of dividends

For one modeled California resident at a 9.3% state rate, take $1,000 in box 1a of a 1099-DIV. The exclusion is the dividend times the fund’s percentage, and the state tax falls on the rest.

Per $1,000 of income, SGOV costs a California holder about $4.50 more in state tax than VBIL and about $88 less than SPAXX. Scale it to your own balance: at a 3.6% yield, $100,000 earns roughly $3,600 a year, so multiply the last column by 3.6.

SGOV’s percentage moves from year to year

The percentage describes what a fund earned over one year, so it moves even when the fund’s mandate does not. iShares’s three most recent supplements show the drift.¹

iShares does not itemize the income behind the gap between SGOV’s percentage and 100%. For your return, the practical rule is to use the figure for the tax year you are filing. The 2025 figure applies to a 2025 return, and the 2026 figure will appear in early 2027.

How to claim it on your state return

1. Find the fund’s ordinary dividends in box 1a of your 1099-DIV. At most brokerages the supplemental pages break this out by fund.
2. Look up the percentage for that tax year in the sponsor’s supplement (the sources below link each one).
3. Multiply. If you live in California, Connecticut or New York and the fund failed the quarterly test, the result is zero.
4. Enter the result as a subtraction for U.S. government obligation interest on your state return. Tax software usually asks for either the dollar amount or the percentage; it does not look the percentage up for you.

WisdomTree’s own tax note makes the same point: reporting the full distribution as state-taxable without the adjustment means paying more state tax than required.⁴ If you have already filed and skipped it, an amended state return can recover the difference; check your state’s deadline for amendments.

When the exemption does not matter

• You live in a state with no income tax. There is nothing to exclude, and the comparison between cash funds comes down to yield and expense ratio.
• The fund sits in an IRA or 401(k). Withdrawals are taxed under the account’s own rules, traditional or Roth, regardless of what the fund earned inside it, so the percentage has no effect.
• Your balance is small. On $5,000 at 3.6%, the full exemption is worth about $17 a year at a 9.3% state rate. It is still worth claiming, but it should not decide where the money sits.

Federal tax is unaffected in every case. Dividends from SGOV and the other funds above are ordinary income on your federal return.

How Summitward helps

Frequently asked questions

What percentage of SGOV is state tax exempt?

95.14% for tax year 2025, per iShares. It was 97.53% for 2024 and 96.45% for 2023. Use the figure for the year on the return you are filing.

Is SGOV exempt from California state tax?

Mostly. SGOV met the requirement that at least 50% of its assets be in government obligations at every quarter end, so a California resident can exclude 95.14% of 2025 SGOV dividends. The remaining 4.86% is taxable.

Is SGOV exempt from federal tax?

No. The dividends are ordinary income for federal purposes. The exemption applies only to state and local income tax.

Does my 1099 already apply the exemption?

Usually not. Box 1a reports total ordinary dividends. Your brokerage supplement may print the fund’s government percentage, but you or your tax software still have to enter the subtraction on the state return.

Is SPAXX state tax exempt?

Partly, and only outside California, Connecticut and New York. Fidelity reported 50.90% of SPAXX’s 2025 income from government obligations and marked the fund as failing the quarterly test, so residents of those three states can exclude none of it. See SPAXX vs. HYSA for what that does to the comparison with a bank.

Is BIL state tax exempt?

BIL holds Treasury bills maturing in one to three months, so its percentage should be close to SGOV’s or higher. State Street publishes the figure in its annual tax summary on the fund’s documents page rather than in a stand-alone PDF; check it there before filing.

Which cash fund has the highest state-exempt share?

Among the funds in the table, VBIL and VUSXX reported 100.00% for 2025, followed by USFR at about 99.95%, TFLO at 99.21% and FDLXX at 98.67%.

Related guides

• SGOV vs. HYSA: the APY a bank has to pay to match SGOV after state tax.
• SGOV vs. VBIL: what the 95.14% versus 100% gap is worth alongside the fee difference.
• SPAXX vs. SGOV: moving cash out of Fidelity’s default core position.
• Best Fidelity core position: SPAXX, FZFXX, FDLXX and FCASH compared.
• VUSXX vs. VMFXX: the same question for Vanguard’s settlement fund.
• Where to park your cash: bills, savings accounts and municipal money funds side by side.

Sources

1. BlackRock, “U.S. Government Source Income Information,” iShares, tax years 2025, 2024 and 2023 (SGOV 95.14%, 97.53%, 96.45%; SHV 89.80%, 94.64%, 94.60%; TFLO 99.21%, 99.59%, 97.76%; all marked as holding at least 50% in federal obligations at the end of each quarter of the fiscal year). 2025 (PDF), 2024 (PDF), 2023 (PDF)
2. Vanguard, “U.S. government obligations income information, important tax information for 2025” (VBIL 100.00%, VUSXX 100.00%, VMFXX 66.61%, each marked as meeting the California, Connecticut and New York requirement that 50% of assets at each quarter end be U.S. government obligations). investor.vanguard.com (PDF)
3. Fidelity, “2025 Percentage of Income from U.S. Government Securities” (Treasury Only Money Market 98.67%; Government Money Market 50.90%; Treasury Money Market 61.52%; Money Market Fund SPRXX 14.56%; the last three marked as not meeting the California, Connecticut and New York minimum). fidelity.com (PDF)
4. Kevin Flanagan and Clint Martin, “Don’t Overlook the State Tax Exemption on U.S. Treasury Income,” WisdomTree, February 24, 2026 (USFR approximately 99.95% of ordinary income from direct U.S. Treasury obligations per the annual tax supplement). wisdomtree.com
5. California Revenue and Taxation Code section 17145 (a regulated investment company may pay state-exempt dividends only if at least 50% of the value of its total assets is in state-exempt obligations at the close of each quarter of its taxable year). leginfo.legislature.ca.gov

Author disclosure

I hold Treasury bill funds for cash and have no relationship with any sponsor named here. Every percentage above is the sponsor’s own published figure for the tax year shown. Nothing here is tax advice; state rules differ, and the percentages change each year.