I have invested in two money market mutual funds. Are the earnings from these fund shares treated as interest or dividends for federal income tax purposes? E.S.
Income from money market mutual funds is considered dividends and will be treated for federal income tax purposes as ordinary income. Further, since the income received by the money market mutual funds is primarily interest, the dividends do not qualify for the $100 exemption when calculating your income tax. In the event the fund realizes capital gains, unlikely in money-market funds, those will be shown perhaps once a year on your statement with a direction on how they are to be treated.