I own shares of the Vanguard New York Long-Term Tax-Exempt Fund (Admiral Shares)(VNYUX).

I'm wondering exactly what is tax-free about it. The link says that the "interest income" is tax-free (reading carefully, it says that at least 80% of it will be tax-free, but in practice it has been close to 100%). I assume this is what I see as dividends for the fund in my statements and transaction history on the website.

But how about capital gains? In addition to the dividends/interest income, the share price fluctuates. If I sell or exchange shares, will I have to pay capital gains (or take a capital loss)?

  • 2
    Are you a NY resident? Muni bonds are usually tax free in the State that issued them, but not in other states. – littleadv Feb 4 '14 at 19:46
  • Yes I am - but good point, definitely worth adding here. – Jer Feb 5 '14 at 15:36

Yes, even though interest might be tax free, a capital gain or loss on sale of the fund is taxable.

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