Discussion:Tax exempt Mutual Funds
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Discussion Forum Index --> Tax Questions --> Tax exempt Mutual Funds
Www.cpa1.biz (talk|edits) said: | 1 September 2008 |
| Almanacers,
A taxpayer I am working with has tax exempt interest from a CA muni bond fund(schwab fund). She is exempt from paying interest on the federal level. Do any of you all know if she is exempt at the state level for CA? Bj | |
| 1 September 2008 | |
| Depends on the percentage of total funds that are invested in California bonds. | |
| 1 September 2008 | |
| My suspicion is that this Schwab fund is totally invested in Ca. muni bonds so therefore all of the interest would be exempt on the Ca. state tax return. The taxpayer should have been provided with a summary statement showing the percentage of the assets that are invested in California muni bonds .
However if this percent is less than 50 % than all of the interest is taxable. If the percentage is between 51-99% then that percentage multilied by the total interest is exempt from tax. My experience is that most tax preparers will exempt the entire interest when the percentage is between 51-99 % but this is not correct . | |
Www.cpa1.biz (talk|edits) said: | 1 September 2008 |
| Yes, over 50% if invested into cali muni bonds. So both federal and state taxes are exempt from this income?
Thanks | |
| 2 September 2008 | |
| If 100% of the income consists of California muni-bond interest, then the answer is yes. | |
Michaelstar (talk|edits) said: | 2 September 2008 |
| Also see this prior post on the subject.
http://www.taxalmanac.org/index.php/Discussion:California%27s_50%25_bond_interest_rule | |
| 2 September 2008 | |
| If client is a resident of the state, there is no income tax. If the client lives somewhere else and has CA munis, it is taxable income in the state where client lives. | |
