1099-DIV state subtraction helper: how much of your fund dividends is state-tax-free?
Money market funds and Treasury ETFs that hold U.S. Treasuries pass part of their dividends through as income from U.S. government obligations. Most states let you subtract that part. This helper works out the amount, fund by fund, for your state.
Prefilled with the state's top 2026 rate (Tax Foundation). Change it to your own bracket.
Your funds
One row per fund. Ordinary dividends = Form 1099-DIV box 1a for that fund. U.S. government obligations % = the percentage in the fund's year-end tax supplement (pick a fund from our list to prefill its 2025 figure). The 50% column only matters in California, Connecticut and New York.
| Fund (pick from our list or type) | Ordinary dividends (box 1a, $) | U.S. gov't obligations % | Met 50% test (CA/CT/NY) | State-exempt amount |
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How it works
- Exempt amount = ordinary dividends × the fund's U.S. government obligations percentage. That is the method fund companies give in their tax supplements (for example Vanguard's). Only dividends traced to direct Treasury and certain federal-agency holdings qualify; repurchase agreements (repo) generally don't, which is why a government money fund's percentage can be well under 100%.
- California, Connecticut and New York require the fund to have held at least 50% of its assets in U.S. government obligations at the end of each quarter. Pass: the percentage applies. Fail or unknown: $0 exempt (CA R&TC § 17145, NY Tax Law § 612 and TSB-M-86(7)I, Conn. reg. § 12-701(a)(20)-3; issuer letters such as Fidelity's say the same).
- Every other state with an income tax: we apply the percentage with no minimum, which is how fund companies describe the general rule. A few states have their own wrinkles, so read your state's instructions for the line that subtracts U.S. government interest.
- No state income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming): nothing to subtract.
- Treasury bills you hold directly are different. Their interest is on Form 1099-INT and is fully exempt from state tax in every state (31 U.S.C. § 3124), with no 50% test. Don't enter them here.
- Use the percentage for the same tax year as your 1099-DIV. Apply it to ordinary dividends only, not capital gain distributions (box 2a). The percentages in our list are the funds' 2025 figures.
Worked example
A New York resident got two 1099-DIVs:
- A Treasury money fund paid $1,000 of ordinary dividends. Its tax letter says 98.67% came from U.S. government obligations and that it met the 50% test. Exempt in New York: $1,000 × 98.67% = $986.70.
- A government money fund paid $500. Its letter says 50.90%, but it did not meet the 50% test. Exempt in New York: $0.
New York subtraction: $986.70. At a 6.85% New York rate that is about $67.59 of state tax saved. The same two funds for a New Jersey resident (no 50% test): $986.70 + $500 × 50.90% = $1,241.20. Press "Load the example" to see it in the helper.
2025 issuer tax documents behind our fund list:
- Vanguard, U.S. government obligations income information (tax year 2025)
- iShares 2025 U.S. Government Source Income Information
- Fidelity TY25 GSE Supplemental Letter
- SPDR ETF 2025 Tax Summary - Secondary Layout (col. 11: % of Income From Federal Securities)
- Schwab Funds 2025 Supplementary Tax Information
- F/m Investments 2025 Tax Insert
- Global X ETFs 2025 Year-End Tax Supplement (col. 21: Income from Direct Federal Obligations)
Sources
- Vanguard: U.S. government obligations income information, tax year 2025 (how to apply the percentage to Form 1099-DIV box 1a)
- Fidelity TY25 GSE supplemental letter (CA/CT/NY minimum-investment rule, per-fund pass/fail)
- California Revenue and Taxation Code § 17145
- New York Tax Law § 612
- NY Dept. of Taxation, TSB-M-86(7)I: Taxation of Dividends Paid by Regulated Investment Companies
- Regs. Conn. State Agencies § 12-701(a)(20)-3
- 31 U.S.C. § 3124: U.S. obligations exempt from state and local tax