FDLXX vs SPAXX: Two Fidelity Cash Funds, One Tax Gap

If you hold cash at Fidelity, these are the two names you keep running into. SPAXX, the Fidelity Government Money Market Fund, is the default core position, so any uninvested cash is already sitting there earning yield. FDLXX, the Fidelity Treasury Only Money Market Fund, is one you have to go buy deliberately. Both are about as safe as cash gets, and both charge the same fee. So why would anyone bother with the one that takes an extra step?

One reason, and it is a good one in the right situation: state taxes.

The Two Funds, Side by Side

The Fee Is Identical, So Ignore It

Both funds charge 0.42%. There is no fee decision to make here, which is unusual and genuinely simplifying: you can throw out the single number people reach for first and look only at what actually separates these two. That is convenience on one side and state taxes on the other.

Convenience Goes to SPAXX

SPAXX is the default sweep, so it is effortless. Cash from a deposit, a dividend, or a sale lands in it and immediately earns the money market yield, and it is already there when you want to buy something. FDLXX cannot do this. You place a trade to move cash into it, and you sell out of it when you need the money back. For a cash balance you are actively spending from or redeploying, SPAXX is simply less friction, and that convenience is worth something real.

State Taxes Go to FDLXX, and That Is the Whole Point

Here is the reason FDLXX exists for the people who use it. Income from US Treasury debt is generally exempt from state and local income tax. FDLXX holds almost nothing but Treasuries, so nearly all of its income qualifies for that exemption. SPAXX holds a large slice of repurchase agreements, and repo income does not qualify, so only part of SPAXX's payout is state-exempt, and that share is often well below half.

In California, New York, and Connecticut this gets sharper. Those three states require a fund to hold at least 50% US government obligations before any of its income counts as exempt. SPAXX's repo position frequently drops its qualifying share under that line, which means a resident of those states can get no state exemption on SPAXX at all, while FDLXX clears the bar and keeps most of its income out of state tax. On a large cash balance in a high-tax state, that is real money, and it is the entire reason to take the extra step of buying FDLXX. The full state-by-state logic is in the Treasury state-tax breakdown.

The Short Version

• FDLXX (Treasury-only) and SPAXX (government, with repos) are both Fidelity money market funds charging 0.42%.
• The fee is identical, so it is not part of the decision.
• SPAXX is the default sweep: cash earns automatically, no trade needed.
• FDLXX's income is almost fully state-tax exempt; SPAXX's is only partly, because of its repo holdings.
• In CA, NY, and CT, SPAXX often fails the 50% threshold and gives no state exemption, while FDLXX clears it.
• High state tax, parked cash: FDLXX. Everyday cash, or no state income tax: SPAXX's convenience wins.

Wondering how these stack up against a Treasury ETF you can hold at any broker? See SGOV vs FDLXX and SGOV vs SPAXX. Every cash matchup in one place is on the cash comparisons hub.

Common Questions

What is the difference between FDLXX and SPAXX?

Both are Fidelity government money market funds charging 0.42%, so the fee is identical. SPAXX is the default sweep fund, meaning uninvested cash lands in it automatically; it holds government securities including repurchase agreements. FDLXX is a Treasury-only fund you have to buy on purpose; it holds almost entirely US Treasury debt. Because Treasury income is largely exempt from state tax and repo income is not, FDLXX passes far more state-tax-exempt income through to you. SPAXX wins on convenience; FDLXX wins on state taxes.

Is FDLXX or SPAXX better for state taxes?

FDLXX, usually by a wide margin. It holds almost only US Treasury debt, and Treasury income is generally exempt from state and local income tax, so most of FDLXX's payout escapes state tax. SPAXX holds a large slice of repurchase agreements, whose income does not qualify, so a much smaller share of SPAXX's payout is state-exempt, often well under half. In a high-tax state the gap can be worth more than any yield difference between the two.

Is SPAXX exempt from state tax in California or New York?

Often not at all. California, New York, and Connecticut require a fund to hold at least 50% US government obligations before any of its income can be treated as state-exempt. SPAXX's large repurchase-agreement position frequently pushes its qualifying share below that 50% threshold, in which case residents of those three states get no state exemption on SPAXX at all. FDLXX, being Treasury-only, clears the threshold comfortably, which is exactly why it matters there.

Why is SPAXX the default and FDLXX is not?

SPAXX is Fidelity's core sweep fund, so any uninvested cash is moved into it automatically and starts earning yield with no action from you. FDLXX is not a sweep option; you buy it with a deliberate trade and sell it when you need the cash back. That convenience is SPAXX's whole advantage: for an everyday cash balance you are actively using, it is effortless. FDLXX is the better home for cash you are parking and want to tax-optimize.

Do FDLXX and SPAXX have the same yield?

Their gross yields are usually close, because both track short-term government rates and charge the same 0.42% fee. The difference shows up after tax, not before it. In a taxable account in a high-tax state, FDLXX's much larger state-tax exemption can leave you with more money in hand even when the two funds quote a similar headline yield, because less of FDLXX's income is clawed back by the state.