Is SPAXX interest income tax exempt? 1099INT shows $0 but 1099DIV shows distributions

SPAXX is Fidelity's Government Money Market Fund and is NOT tax exempt. The confusion comes from how it's reported. Money market funds technically pay dividends, not interest, which is why you're seeing it on the 1099-DIV instead of the 1099-INT. Since SPAXX invests primarily in government securities, the dividends it pays are considered "ordinary dividends" and are taxable as ordinary income on your federal return. The reason you see identical amounts in both "Ordinary Div" and "Div Distributions" columns is because all of the distributions are classified as ordinary dividends. If it were tax-exempt, you'd see amounts in the "Exempt-Interest Dividends" column of your 1099-DIV instead, and your brokerage would likely label it as something like "Municipal Money Market" rather than "Government Money Market.

I was in the same boat as you last year trying to figure out this exact SPAXX tax situation! I spent hours on the phone with my brokerage and reading through IRS publications until I finally tried https://taxr.ai which helped me understand how to properly report these dividends. Their system analyzed my 1099-DIV and pointed out that SPAXX dividends aren't tax-exempt - they're ordinary dividends that need to be reported on line 3b of Form 1040. What I found really helpful was uploading my 1099-DIV to their system and getting a clear breakdown of which money market funds generate taxable vs tax-exempt income. Turns out SPAXX specifically is taxable at the federal level, though some other money market funds that focus on municipal securities can be tax-exempt.

So I gave taxr.ai a try after my skeptical questions above. Actually impressed with how it handled my investment forms. It correctly identified my SPAXX dividends as taxable ordinary dividends and explained why they show up on the 1099-DIV instead of 1099-INT (apparently money market funds technically pay dividends even though we think of them as interest-bearing). The system flagged a mistake I was about to make - I was going to report these as qualified dividends which would have given me a lower tax rate, but it explained that money market dividends don't qualify for that preferential rate. Saved me from a potential audit flag! It also explained which of my other investments generated tax-exempt income (my municipal bond fund) versus taxable income. Way clearer than the cryptic descriptions on my brokerage statements.

If you're still having trouble figuring out your SPAXX tax situation, you might need to talk directly with the IRS. I was in the same boat last year and spent WEEKS trying to get through on their helpline. Always busy signals or 2+ hour wait times only to get disconnected. Finally found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - they basically call the IRS for you and then call you when they've got an agent on the line. Managed to get through to a real IRS person in about 40 minutes instead of the usual endless hold music. The agent confirmed exactly how SPAXX dividends should be reported and cleared up my confusion about why they weren't showing on my 1099-INT. She explained that money market funds technically pay dividends rather than interest, so they appear on the 1099-DIV even though we commonly think of them as interest-bearing accounts.

OK I have to eat my words about Claimyr. After posting my skeptical comment I decided to try calling the IRS myself about some SPAXX dividend questions and spent TWO HOURS on hold only to get disconnected. Was so frustrated I gave Claimyr a shot the next day. They called me back in about 35 minutes with an actual IRS agent on the line. The agent confirmed that SPAXX dividends are indeed taxable ordinary income that should be reported on line 3b of Form 1040, and explained why they show up on 1099-DIV instead of 1099-INT (which was my exact confusion). Honestly it was worth it just to save my sanity from the hold music. Will definitely use them again when I need to talk to the IRS about my tax questions.

Just to add another data point - I have both SPAXX and SPAXX: Cash Reserves in my Fidelity accounts. Both pay ordinary dividends that are taxable. The difference is that SPAXX (Fidelity Government Money Market) invests in government securities, while some other money market funds might invest in municipal securities which could potentially be tax exempt. If you want tax-exempt interest, look into funds with names like "Municipal Money Market" or similar. Those typically invest in municipal bonds which are exempt from federal taxes (and sometimes state taxes if you buy one specific to your state).

Sorry to come in late on this thread but I just want to make sure I'm understanding right. I have SPAXX in my Fidelity account and I got $329 in dividends last year according to my 1099-DIV. So I just put that on line 3b of my 1040 and pay regular income tax on it? Not the lower qualified dividend rate?

Just wanted to add some clarity for anyone still confused about SPAXX reporting. I work as a tax preparer and see this confusion every tax season. The key thing to remember is that SPAXX is structured as a mutual fund that invests in government securities, not a traditional bank savings account. That's why the income is technically "dividends" rather than "interest" - even though it functions like a savings account from your perspective. Here's what you need to know for your tax return: - Report the total from your 1099-DIV Box 1a (ordinary dividends) on Form 1040 line 3b - Do NOT include SPAXX dividends on line 3a (qualified dividends) - they don't qualify for the lower tax rate - The income is taxable at your ordinary income tax rates, just like wages or traditional interest If you want truly tax-exempt income, look for municipal money market funds (these will have "Municipal" or "Tax-Free" in the name). But remember, tax-exempt funds typically have lower yields to compensate for the tax advantage.

This is such a helpful thread! I've been dealing with the same SPAXX confusion for years. Just wanted to add one more tip for anyone who's still struggling with this - make sure to check if any of your SPAXX dividends were reinvested during the year. Sometimes people forget that when dividends are automatically reinvested to buy more shares, you still need to report those dividends as taxable income even though you didn't receive cash. The reinvested amount should still show up on your 1099-DIV, but it's easy to overlook if you're not expecting it. Also, if you have SPAXX in multiple accounts (taxable brokerage, Roth IRA, traditional IRA), only the dividends from your taxable account will show up on the 1099-DIV. The dividends in your retirement accounts aren't currently taxable, which might explain why some people see different amounts than they expected. Thanks to everyone who explained the government securities vs municipal securities distinction - that finally made it click for me why SPAXX isn't tax-exempt!

Great thread everyone! As someone who just went through this exact same confusion with SPAXX, I wanted to share what finally helped me understand it. The lightbulb moment for me was realizing that even though SPAXX feels like a savings account (you can transfer money in and out easily), it's technically a mutual fund. That's why the IRS treats the payments as dividends instead of interest, even though we think of them as "interest" from our cash sitting there. What really helped me was looking at my 1099-DIV and seeing that Box 1a (ordinary dividends) had my SPAXX amount, but Box 1b (qualified dividends) was either blank or had a much smaller amount from my other stock dividends. This confirmed that SPAXX dividends get the ordinary income tax treatment, not the preferential qualified dividend rate. For anyone still confused: think of SPAXX like a very boring stock fund that happens to invest in super safe government securities instead of company stocks. The "dividends" it pays are just your share of the interest the fund earns on those government bonds and treasury bills. Safe and stable, but definitely taxable!

This has been an incredibly informative thread! I've been wrestling with this exact SPAXX issue for my 2024 taxes and was getting nowhere with the IRS publications. What really helped me was the explanation about how SPAXX is structured as a mutual fund rather than a traditional savings account, even though it functions like one from our perspective. That finally explains why the income shows up on Form 1099-DIV instead of 1099-INT. Just to confirm my understanding: I should take the total ordinary dividends amount from Box 1a of my 1099-DIV (which includes my SPAXX distributions) and report that on line 3b of Form 1040, but NOT include the SPAXX portion on line 3a since money market dividends don't qualify for the lower qualified dividend tax rate. They get taxed at my regular income tax rate just like my salary. It's frustrating that something so common causes so much confusion every year, but at least now I understand the logic behind it. Thanks to everyone who shared their experiences and explanations - this is exactly the kind of real-world guidance that the official IRS forms are missing!

This thread has been incredibly helpful! I've been dealing with the same SPAXX confusion and finally understand why my "interest" shows up as dividends on my 1099-DIV. One additional point that might help others - if you're using tax software like TurboTax or FreeTaxUSA, when you import or enter your 1099-DIV information, the software should automatically put your SPAXX dividends in the right place (line 3b but not 3a). But it's still worth double-checking to make sure it didn't mistakenly categorize them as qualified dividends. Also, for anyone who might have both SPAXX and actual municipal money market funds, make sure you're distinguishing between them on your return. The municipal fund dividends would be tax-exempt and show up in a different box on your 1099-DIV (usually Box 12 for exempt-interest dividends). Thanks everyone for sharing your experiences - this kind of peer-to-peer tax guidance is so much more valuable than wading through dense IRS publications!

This thread has been incredibly educational! I'm dealing with the exact same SPAXX situation and was completely baffled by why my "money market interest" was showing up on my 1099-DIV instead of 1099-INT. The explanation about SPAXX being technically structured as a mutual fund that invests in government securities (rather than a traditional savings account) finally makes it all click. So even though it functions like a high-yield savings account from our perspective, the IRS treats the payments as dividends because that's what mutual funds pay out. Just to make sure I have this right for my tax filing: I take the SPAXX amount from Box 1a of my 1099-DIV and include it in the total on line 3b of Form 1040 (ordinary dividends), but I do NOT include it on line 3a (qualified dividends) since money market fund dividends don't get the preferential tax rate. They get taxed as regular income just like my salary. One follow-up question - does anyone know if there's a way to see a breakdown on your 1099-DIV of exactly which funds contributed to your ordinary dividend total? My form just shows one lump sum and I'd like to verify that my SPAXX amount is included correctly. Thanks everyone for sharing your knowledge - this is exactly the kind of practical tax guidance that's impossible to find in the official IRS publications!

This has been such an enlightening discussion! I've been struggling with this exact SPAXX issue for my 2024 taxes and was getting completely lost trying to figure out why my money market "interest" wasn't showing up on my 1099-INT. The key insight that finally made everything clear was understanding that SPAXX is technically a mutual fund that invests in government securities, not a traditional bank account. That's why the payments are classified as "dividends" rather than "interest" for tax purposes, even though it feels like a savings account when we use it. So for anyone else dealing with this confusion: your SPAXX distributions should be reported as ordinary dividends on line 3b of your Form 1040, but they do NOT qualify for the lower qualified dividend tax rate (so don't include them on line 3a). They get taxed at your regular income tax rate, just like wages. One thing that might help others - I found it useful to think of SPAXX as a very conservative mutual fund that happens to invest in super-safe government bonds instead of stocks. The "dividends" it pays are just your share of the interest that fund earns on those government securities. Safe and stable, but definitely taxable at the federal level. Thanks to everyone who shared their experiences and explanations - this kind of real-world guidance is so much more helpful than trying to decipher the official IRS publications!

This thread has been incredibly valuable! As someone who just went through my first year of having SPAXX in my portfolio, I was completely stumped by why my money market earnings showed up on my 1099-DIV instead of 1099-INT like I expected. The explanation about SPAXX being structured as a mutual fund rather than a traditional savings account was the missing piece for me. It makes perfect sense now - mutual funds pay dividends, even if those dividends come from very conservative government securities rather than stocks. I wanted to add one practical tip that helped me verify everything was correct: I compared the monthly dividend amounts shown in my Fidelity account statements throughout 2024 with the total on my 1099-DIV. This gave me confidence that the dividend total was accurate and that I wasn't missing anything. For other newcomers dealing with this - don't feel bad about being confused! The fact that SPAXX functions exactly like a high-yield savings account but gets taxed like a mutual fund is genuinely counterintuitive. But now I understand: ordinary dividends on line 3b of Form 1040, taxed at regular income rates, no qualified dividend treatment. Thanks to everyone who shared their knowledge and experiences. This is exactly the kind of community-driven education that makes complex tax topics actually understandable!

This has been such a comprehensive and helpful discussion! As someone new to both this community and investment taxation, I've learned more from this thread than from hours of trying to decode IRS publications. The key insight that finally made SPAXX taxation clear for me was understanding that it's technically a mutual fund that invests in government securities, not a traditional bank savings account - even though it functions exactly like one from our perspective. That's why the income is classified as "dividends" rather than "interest" and shows up on Form 1099-DIV instead of 1099-INT. For anyone else still working through this confusion: SPAXX dividends should be reported as ordinary dividends on line 3b of Form 1040, but they do NOT qualify for the lower qualified dividend tax rate (so don't include them on line 3a). They get taxed at your regular income tax rate, just like salary or wages. What I found really helpful was thinking of SPAXX as a very conservative mutual fund that happens to invest in super-safe government bonds instead of stocks. The "dividends" are simply your share of the interest that fund earns on those government securities. Thanks to everyone who shared their experiences and practical tips - this kind of peer-to-peer guidance is invaluable for navigating these complex tax situations!

This thread has been absolutely invaluable for understanding SPAXX taxation! As a newcomer to the community, I was completely bewildered by why my money market fund earnings appeared on my 1099-DIV rather than 1099-INT. The breakthrough for me was realizing that SPAXX is legally structured as a mutual fund that invests in government securities, even though it operates exactly like a high-yield savings account from our user perspective. This explains why the IRS treats the payments as "dividends" rather than "interest" - because that's what mutual funds distribute to shareholders. So for my fellow newcomers who might be struggling with this: your SPAXX distributions belong on line 3b of Form 1040 as ordinary dividends, but they do NOT qualify for the preferential qualified dividend tax rate on line 3a. They're taxed at your regular income tax bracket, just like wages or traditional interest income. What helped me mentally was thinking of SPAXX as an extremely conservative mutual fund that happens to invest in ultra-safe government Treasury bills and bonds instead of company stocks. The "dividends" it pays are simply your proportional share of the interest income the fund earns on those government securities. Thank you to everyone who shared their experiences and practical insights - this community-driven education is far more accessible than trying to navigate the official IRS guidance alone!

This thread has been a game-changer for understanding SPAXX taxation! As someone new to investing and completely overwhelmed by tax forms, I was pulling my hair out trying to figure out why my money market fund showed up on a dividend form instead of an interest form. The explanation that finally clicked for me was understanding that SPAXX is technically a mutual fund that pools money to invest in government securities, rather than a direct bank deposit account. Even though we interact with it exactly like a savings account (deposit, withdraw, earn money on the balance), the legal structure makes it a mutual fund - and mutual funds pay dividends, not interest. So for other confused newcomers: your SPAXX earnings go on line 3b of Form 1040 as ordinary dividends, but they don't get the special lower tax rate that qualified dividends receive (line 3a). They're taxed at your normal income tax rate, same as your paycheck. I really appreciate how this community breaks down complex tax concepts into understandable explanations. The IRS forms and publications make this stuff seem way more complicated than it needs to be. Having real people share their experiences and walk through the logic makes all the difference!

This thread has been incredibly helpful! As a newcomer to this community, I was completely lost trying to understand why my SPAXX earnings weren't showing up as interest income on my tax forms. The key insight that finally made everything clear was learning that SPAXX is legally structured as a mutual fund that invests in government securities, not a traditional bank savings account - even though it functions exactly like one when we use it. This is why the payments are classified as "dividends" and appear on Form 1099-DIV instead of 1099-INT. For anyone else struggling with this: report your SPAXX distributions as ordinary dividends on line 3b of Form 1040, but do NOT include them on line 3a since money market fund dividends don't qualify for the lower qualified dividend tax rate. They get taxed at your regular income tax rate, just like wages. What helped me understand it was thinking of SPAXX as a very conservative mutual fund that happens to invest in ultra-safe government Treasury securities instead of stocks. The "dividends" are simply your share of the interest income the fund earns on those government bonds. Thank you to everyone who shared their experiences and explanations - this community-driven guidance is so much more accessible than trying to decode IRS publications on your own!

This thread has been absolutely fantastic for clearing up SPAXX taxation confusion! As a newcomer to both investing and this community, I was completely stumped when my money market fund earnings appeared on a 1099-DIV instead of a 1099-INT like I expected. The breakthrough moment for me was understanding that SPAXX is technically structured as a mutual fund that invests in government securities, even though it operates exactly like a high-yield savings account from our perspective. This legal structure is why the IRS classifies the payments as "dividends" rather than "interest" - because that's what mutual funds distribute to shareholders. For other newcomers dealing with this same confusion: your SPAXX distributions should be reported as ordinary dividends on line 3b of Form 1040, but they do NOT qualify for the preferential qualified dividend tax rate (so don't include them on line 3a). They're taxed at your regular income tax rate, just like salary or traditional interest income. What really helped me conceptualize this was thinking of SPAXX as an extremely conservative mutual fund that happens to invest in ultra-safe government Treasury bills and bonds instead of company stocks. The "dividends" it pays are simply your proportional share of the interest income that the fund earns on those government securities. Thank you to everyone who contributed their experiences and insights to this discussion - this kind of peer-to-peer guidance is invaluable for navigating complex tax situations that the official IRS publications don't explain clearly!