What is the difference between a taxable money market fund and a tax-exempt money market fund?
A. The differences in a taxable fixed-income fund and a tax-exempt fixed-income fund relate to the types of fixed-income securities in which the fund invests. Tax-exempt fixed-income funds invest in municipal securities, the income from which is generally federally tax-exempt and also generally state-income tax-exempt for those who are investing in municipal securities issued in the state where they reside or on certain obligations of United States territories (e.g., Puerto Rico, Guam, etc.). For example, investors who are New York residents who invest in a New York tax-exempt fixed-income fund are exempt from federal and local income taxes on the income from their investment. However, should a Massachusetts resident invest in a New York tax-exempt fixed-income fund, the income from the investment would be exempt from federal income tax but not state and local income tax in the Commonwealth of Massachusetts. Taxable money market funds typically invest in a diversified portfolio of shor
