VUSXX vs. VMFXX: Which Vanguard Money Market Fund Keeps More After State Tax?

Yields move. Both figures here are Vanguard’s published 7-day SEC yields for September 4, 2026, so the two funds are compared on the same day and the same basis. Money market funds have no licensed daily feed, so the calculator starts from those snapshots. The government-obligation percentages are for tax year 2025 and are republished every January.

The short version

VMFXX is where Vanguard settles your cash. VUSXX is the same kind of fund holding Treasuries only, at a lower expense ratio and a slightly higher yield, with a $3,000 minimum. For 2025 Vanguard reported 100% of VUSXX’s income as Treasury interest and 66.61% of VMFXX’s, and marked both as passing the California, Connecticut and New York quarterly test, so unlike Fidelity’s SPAXX, VMFXX keeps its partial exemption everywhere. That makes the gap real but modest: for one modeled California saver at a 32% federal and 9.3% state rate, VUSXX came out about $80 a year ahead on $50,000; about $54 in a 5% state; about $24 with no state tax, which is just the yield gap. Both funds hold a $1.00 share price, so moving between them realizes nothing. The only real gate is the minimum.

Vanguard customers meet VMFXX without choosing it: it is the settlement fund, so every deposit and every sale lands there. VUSXX sits one menu away and does the same job with a cleaner tax profile. This guide puts a number on the difference and says who should bother, which at these yields is fewer people than the Fidelity version of the same question.

What differs

VMFXX, the Vanguard Federal Money Market Fund, holds Treasury and agency securities plus repurchase agreements collateralized by them. It charges 0.11% and yielded 3.63% on September 4, 2026.² VUSXX, the Vanguard Treasury Money Market Fund, holds Treasuries alone, charges 0.07%, yielded 3.70% on the same day, and requires $3,000 to open.¹ Both keep a $1.00 share price and pay monthly.

The repurchase agreements are what separate the two on tax. Interest on Treasury obligations is exempt from state income tax; interest earned through a repurchase agreement generally is not, even when the collateral is a Treasury. A fund’s exempt share is therefore close to its Treasury share, and Vanguard publishes it each January.

The state-tax gap

For 2025, 100.00% of VUSXX’s income and 66.61% of VMFXX’s came from US government obligations.³ In a state with an income tax, all of VUSXX’s interest escapes state tax and about two-thirds of VMFXX’s does.

California, Connecticut and New York add a quarterly test: a fund must have held at least 50% of its assets in government obligations at the end of every quarter, or none of its income is exempt for residents of those states.³ Vanguard marks both funds as meeting it. That is the important difference from the Fidelity pair, where the default fund misses the test and loses its exemption entirely in those three states; VMFXX keeps its two-thirds everywhere. So the gap here is the remaining third, plus seven basis points of yield.

In dollars, for one modeled saver at a 32% federal and 9.3% California rate with $50,000: VMFXX’s 3.63% is worth about 2.36% after tax and VUSXX’s 3.70% about 2.52%, a gap of roughly $80 a year. In a 5% state the gap is about $54. With no state income tax the exemption is worth nothing and the gap is the seven basis points of yield, about $24.

Run your own numbers

Pick your state and account type. Because both funds pass the quarterly test, choosing California or New York does not zero anything out here; the calculator shows the split at your own rates and the balance at which the gap reaches $100 a year.

Moving between them

Both funds hold a $1.00 share price, so exchanging one for the other realizes no gain and costs nothing. VUSXX is not the settlement fund, though, so cash you will need for an upcoming purchase should stay in VMFXX, and new deposits will keep landing there until you move them. The $3,000 minimum is the one real gate, and it also marks roughly where the decision starts to be worth a few minutes: below it you cannot buy VUSXX at all, and just above it the gap is a few dollars a year.

When it does not matter

In a state with no income tax the difference is seven basis points, about $24 a year on $50,000. Inside an IRA or 401(k) the state-tax question never arises and the same applies. At the modeled California rates the gap reaches $100 a year at about $62,000, so a balance well under that can stay in VMFXX without much lost.

If the goal is yield rather than a settlement-style money market fund, a Treasury bill ETF such as VBIL yields more at a lower expense ratio and is fully state-exempt, at the cost of a settlement day. That comparison is SGOV vs. VBIL. VUSXX is the answer for cash that should stay a money market fund at Vanguard.

Key takeaways

Both funds keep their exemption in CA, CT and NY. Vanguard marks VUSXX and VMFXX as passing the quarterly test, which is why this gap is milder than Fidelity’s.
The gap is the remaining third of VMFXX’s income plus seven basis points. 100% Treasury income against 66.61%, and 3.70% against 3.63% on September 4, 2026.
For one modeled California saver, about $80 a year on $50,000, roughly $54 in a 5% state, and about $24 with no state tax.
Switching realizes nothing. Both hold $1.00; the $3,000 minimum is the only gate.
Keep purchase money in VMFXX. It is the settlement fund, and deposits land there regardless.

How Summitward helps

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Enter your Vanguard cash positions and see what each yields after your own federal and state rates.

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Frequently asked questions

Is VUSXX better than VMFXX?

After state tax, yes, by a modest margin in any state with an income tax. For one modeled California saver the gap was about $80 a year on $50,000 at September 2026 yields. With no state income tax the difference is seven basis points of yield.

Does VMFXX qualify for the state-tax exemption in California and New York?

Yes, for the government-obligation share of its income. Vanguard reported 66.61% for 2025 and marked VMFXX as meeting the quarterly 50% holdings test those states require, so residents can exempt that two-thirds. That is where it differs from Fidelity’s SPAXX, which missed the test.

What is the minimum for VUSXX?

$3,000 to open, per Vanguard’s fund page. VMFXX, as the settlement fund, has no separate minimum in practice.

Does moving from VMFXX to VUSXX trigger taxes?

No. Both funds hold a stable $1.00 share price, so the exchange realizes no gain. Interest each fund has already paid is taxable as usual.

Related guides

FDLXX vs. SPAXX: the Fidelity version of this decision, where the default fund loses its exemption outright.
SGOV vs. VBIL: Vanguard’s Treasury bill ETF against iShares’.
Where to Park Your Cash: sizing the layers and the wider menu.
VUSXX vs. VMFXX at a glance: the compact version with the table.

Sources

Vanguard, “Vanguard Treasury Money Market Fund (VUSXX),” fund profile read September 7, 2026 (expense ratio 0.07%; 7-day SEC yield 3.70% as of September 4, 2026; $3,000 minimum; inception December 14, 1992). investor.vanguard.com
Vanguard, “Vanguard Federal Money Market Fund (VMFXX),” fund profile read September 7, 2026 (expense ratio 0.11%; 7-day SEC yield 3.63% as of September 4, 2026; the brokerage settlement fund). investor.vanguard.com
Vanguard, “U.S. government obligations income information,” tax year 2025, document USGO 012026 (VUSXX 100.00%, VMFXX 66.61%; both marked as meeting the California, Connecticut and New York requirement that 50% of assets be in US government obligations at each quarter end). investor.vanguard.com (PDF)

Author disclosure

I hold cash at more than one brokerage and have no relationship with Vanguard. Every figure is Vanguard’s own on the date given, and the two yields are from the same day so they are comparable. Nothing here is tax advice; the state treatment described depends on facts this article cannot see.