Yes, when entering your 1099-INT in TurboTax:
- Report interest on Treasury Bonds in Box 3 (Interest on U.S. Savings Bonds and Treasury Obligations). This step is crucial because TurboTax uses this information to calculate state tax exclusions automatically.
- The screen will ask if you live in ME, MD, MA, NH, NJ, or WV. These states don't tax treasury bond interest.
- If your state isn't listed here and if you are certain it doesn't tax treasury bond interest, you may be able to exclude it when you prepare your state return
- During the state tax section, TurboTax may prompt you to double-check the source of the interest income. If it doesn't, you may need to manually adjust your state return. For some states, this involves entering the Treasury Bond interest as a subtraction on a specific worksheet or form (e.g., Schedule CA for California)
TurboTax doesn't have a clear way to show that capital gains are from Treasury Bonds. Check if your state allows a specific adjustment for capital gains from U.S. Government securities. If so, you may need to manually enter this adjustment on the relevant state form depending on the state where you live.
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