Tax-saving investments | Vanguard (2024)

FAQs

What investments are tax exempt in the US? ›

The tax-exempt sector includes bonds, notes, leases, bond funds, mutual funds, trusts, and life insurance, among other investment vehicles. Government municipal bond issuers offer a guarantee, since the taxing authority typically raises funds to repay any GO bond obligations.

Index mutual funds & ETFs

Index funds—whether mutual funds or ETFs (exchange-traded funds)—are naturally tax-efficient for a couple of reasons: Because index funds simply replicate the holdings of an index, they don't trade in and out of securities as often as an active fund would.

Withdraw anytime, tax-free

Your withdrawals will be free from Income Tax and Capital Gains Tax. The Vanguard Stocks and Shares and ISA is a flexible ISA.

Putting money in an education-related account such as a 529 plan or a Coverdell Education Savings Account. All interest received from each of these accounts isn't taxed if the money covers education costs.

Municipal bonds are generally free of federal tax because the interest from bonds issued by a state, municipality, or other local entity is exempt from federal taxation. As an added benefit, most states will allow a state tax exemption if the owner of the bond resides in the state of issue.

Three target-date fund investors claim Vanguard violated its legal duties by triggering thousands of dollars in surprise tax bills. The plaintiffs claim the investment manager costs investors across the nation hundreds of millions of dollars in damages. The investors owned TDFs in taxable accounts.

At least once a year, funds must pass on any net gains they've realized. As a fund shareholder, you could be on the hook for taxes on gains even if you haven't sold any of your shares.

Mutual funds invested in government or municipal bonds are often referred to as tax-exempt funds because the interest generated by these bonds is not subject to income tax.

Mutual funds invested in government or municipal bonds are often referred to as tax-exempt funds because the interest generated by these bonds is not subject to income tax.

Municipal bonds are generally free of federal tax because the interest from bonds issued by a state, municipality, or other local entity is exempt from federal taxation.

Is Roth IRA tax-exempt? ›

Roth IRAs allow you to pay taxes on money going into your account and then all future withdrawals are tax-free. Roth IRA contributions aren't taxed because the contributions you make to them are usually made with after-tax money, and you can't deduct them.

Municipal money market funds invest primarily in short-term, municipal money market securities issued by states, local governments, and other municipal agencies. They pay interest that is generally exempt from federal income tax.