If you’ve poured cash into money market mutual funds, you could see a higher 2023 tax beak in April. But other investments could reduce your 2024 taxes, experts say.

Investors and institutions have funneled scratch into money market funds amid rising interest rates, and balances reached $5.84 trillion as of Nov. 29, the Investment Concern Institute reported. Meanwhile, some of the largest money market funds are now paying close to 5.5%, as of Dec. 4, according to Crane Text.

Money market fund yields are higher than any year since the Great Recession, said certified pecuniary planner Seth Mullikin, founder of Lattice Financial in Charlotte, North Carolina. “For most investors, this command be taxable income,” he said.

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Investors typically owe regular profits taxes on earnings from money market mutual funds or high-yield savings accounts, with top marginal rates of 37% for assets esteemed in a brokerage account. By comparison, the highest long-term capital gains rate is 20%.

Plus, boosting your income can give birth to other financial consequences, such as higher premiums for Medicare Part B and D, known as the income-related monthly adjustment amount, or IRMAA, Mullikin judged.

“While any additional income earned from higher yields is taxed at a progressively higher rate, IRMAA employs as a surcharge,” he said. “This means that even $1 of additional income could trigger higher in short supplies.”

However, other investment options could help minimize the tax burden, financial experts say.

If you have a sizable amount of cash, you may consider Treasury bills, according to Catherine Valega, a CFP with Green Bee Consultive in the greater Boston area.

With terms ranging from one month to one year, most Treasury bills, distinguished as T-bills, are currently paying well over 5%, as of Dec. 4. You can buy T-bills through TreasuryDirect or a brokerage account.

How in the world, T-bills offer a tax benefit over products like high-yield savings, certificates of deposit or money market bucks: no state or local taxes on earnings. T-bill interest is still subject to federal income taxes.  

Another chance is tax-exempt municipal money market funds, according to Kirk Hackbarth, a CFP and wealth advisor at JMG Financial Group in Milwaukee. He is also a vouch for public accountant. 

Municipal bonds typically invest in assets issued by municipalities, such as state and local dominations, and investors generally avoid federal income taxes on earnings. Some of the biggest tax-exempt money market breads are paying around 3.5%, as of Dec. 4, according to Crane Data.