We're firmly in the 37% federal income tax bracket, plus 2.5% state income tax, plus the 3.8% NIIT. I suspect we'll be in this tax bracket as long as I'm working, assuming continued great health and some good luck. We've got a significant cash reserve and are adding to it, recognizing the funds will be needed in 6-24 months. Is there any reason we should keep our cash reserves in a Prime Money Market fund instead of a Municipal Money Market fund? The effective after tax yield is higher on the Munis, which makes me think there must be credit risk to account for the roughly 60 basis points of extra yield on the Munis. We're not really looking to take much risk with this pile of cash. It's a substantial amount (to us), so the tax savings / avoidance is meaningful. But switching into a Muni Money Market and saving a few thousand dollars a year in 30 seconds or less sounds way too good to be true - what's the catch, if it's not credit risk? And if it is credit risk, how would I quantify such credit risk?
Statistics: Posted by AZAttorney11 — Mon Jan 29, 2024 8:22 pm — Replies 9 — Views 407