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Must I pay state and local income taxes on fund income earned on U.S. government securities?

April 26, 2017earned fund government income income taxes local pay securities State

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Must I pay state and local income taxes on fund income earned on U.S. government securities?

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A. States (and localities) do not tax income earned on direct U.S. government obligations. However, a few states require that a minimum percentage of a mutual fund’s assets usually at least half be invested in these securities to qualify for the exemption. Consult your state’s taxing authority regarding the law in your state.