Can my investment in a tax-exempt bond or money market fund have an impact on my alternative minimum tax liability?
If your tax-exempt bond or money market fund invests in “private activity bonds,” you may be subject to the alternative minimum tax (AMT). Interest income from certain private activity bonds is exempt from federal income tax but may be a tax-preference item for the AMT. Refer to Alternative Minimum Tax: Tax-Preference Dividends by Fund to see whether your fund distributed income that is considered this type of tax-preference item.
A. If your tax-exempt bond or money market fund invests in “private activity bonds,” you may be subject to the alternative minimum tax (AMT). Interest income from certain private activity bonds is exempt from federal income tax but may be a tax-preference item for the AMT. See Vanguard’s insert entitled Alternative Minimum Tax—Tax-Preference Dividends by Fund to see whether your fund distributed income that is considered this type of tax-preference item.
