Where is Interest coming from?

[Rsantangelo]

I have one brokerage account that I imported a consolidated 1099 (Div, Int, B) form from.  It says there was no interest earned.  But the summary for my NJ state tax return says I earned $307 in interest.  Where is this coming from? The closest thing to $307 on that 1099 is a value of $306.42 under “Total Market Discount” (1099-B) related to sale of US Treasury bonds.  Since NJ does not tax gains from sale of US Treasuries, I don’t understand why this amount is being taken as a taxable amount. 

I have not uploaded any other 1099 forms. 

[MarilynG1]

Yes, the Market Discount you see on your 1099-B is actually reported as Interest on your tax return. 

Market discount is the difference between what you paid for a bond, and the maturity redemption price.  If you bought a $1000 bond for $950, your market discount is $50.  This discount must be included in your income, as interest, either over the period you own the bond, or when it is sold.  

In box 1f your broker is reporting the accrued amount of discount over the time you held the bond. TurboTax will show it as interest income on Sch B, and then subtract the same amount from your gain on the sale (Form 8949), since it's already been reported elsewhere. 

Here's detailed info in this Guide to Investment Bonds. 

[Rsantangelo]

Thanks so much for the quick response!   My follow up question is how do I tell TT to NOT include that amount as taxable interest in my NJ state tax return?

[KeshaH]

It looks like the best way to handle this situation is by using the TurboTax Desktop program so you can indicate on the New Jersey interest/dividend worksheet that this interest is tax exempt in Forms Mode.

Are you using TurboTax Online or TurboTax Desktop?