"2023's Surge in Money Market Investments May Lead to Increased Taxation for Investors"

Investors who put money into money market mutual funds in 2023 may face higher tax bills in April due to the funds' high yields. With over $5.84 trillion invested in these funds, many individuals and institutions are earning significant dividends, but these earnings will be subject to regular income taxes rather than the more favorable capital gains rates. For example, a California investor with a 45% tax rate could owe $2,250 in taxes on $100,000 earned from a money market fund with a 5% yield. However, some states may offer tax breaks depending on the underlying assets of the funds.