In most U.S. states, the *dividends you receive from SGOV are not subject to state (or local) income tax, *but with an important nuance on how it’s applied: SGOV itself does not automatically make the dividend state-tax free — you have to calculate the exempt portion.
Here’s how it works:
Why It Can Be State Tax-Free
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SGOV (iShares 0-3 Month Treasury Bond ETF) invests mainly in U.S. Treasury bills.
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Interest on U.S. Treasury securities is generally exempt from state and local income taxes under federal law.
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Because SGOV passes through the income it earns, a large portion of its dividends is derived from that Treasury interest, and that part can be excluded from state taxable income.
? Important: You Must Determine the Exempt Portion
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SGOV reports its dividends on Form 1099-DIV as ordinary dividends — not automatically tax-exempt interest.
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To claim the exemption on your state tax return, you use a supplemental statement from the fund that shows what percentage of the dividend came from U.S. Treasury interest.
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For example, in 2024, SGOV reported ~97.53 % of its dividends as coming from U.S. government obligations — meaning that portion should be exempt from state tax in many states.
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What to Report
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On your state tax form, you typically claim a subtraction/exclusion for the exempt amount of interest income.
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Some states require specific forms or schedules for this.
What May Still Be Taxable
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Any part of the dividend not attributable to U.S. Treasury interest (e.g., income from repurchase agreements or cash holdings) can be subject to state tax.
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Any capital gains from selling SGOV shares are not exempt from state tax and are taxed like other capital gains.
Bottom Line
Federal: SGOV dividends are taxable as ordinary income.
State:
• Most states allow you to exclude the Treasury-interest portion of SGOV dividends from state tax.
• You must calculate and claim the exempt portion based on the fund’s reporting.
• Rules vary by state — some require minimum thresholds or specific reporting.
For your own tax situation, it’s best to check the state revenue publication and the SGOV supplemental tax statement (often available on the iShares website or through your broker) — and consider consulting a tax professional for the exact steps on your tax return.
