State tax filing
TurboTax will automatically identify the amount in Box 3 of Form 1099-iNT as an item to be subtracted from New Jersey income when you enter interest from U.S. Treasury securities in Box 3 of Form 1099-INT in the Federal interview. You can exclude interest and gains from Form 1099-B from Treasury securities in the New Jersey state interview, without removing the form from your Federal return.
When you complete the New Jersey state interview in TurboTax, you are asked a series of questions about any items that need to be treated differently or allocated among different states, (e.g., "My state (ME, MD, MA, NH, NJ, or WV) doesn't tax all of this interest" and you will see the Box 3 amount listed as a subtraction from New Jersey income. You don't have to do anything unless you need to allocate the subtraction amount among different states.
Typically, interest from corporate bonds will be in Box 1, interest from U.S. Treasuries will be in Box 3, and tax-exempt interest from muni bonds will be in Box 8. Even if you don't have to pay income tax on the interest, you still need to include it on your Federal tax return.
- Box 1 of the 1099-INT reports all taxable interest you receive, such as your earnings from a savings account.
- Box 2 reports interest penalties you were charged for withdrawing money from an account before the maturity date.
- Box 3 reports interest earned on U.S. savings bonds or Treasury notes, bills or bonds. Some of this may be tax-exempt.
- Box 4 reports any federal tax withheld on your interest income by the payer.
- Box 8 reports tax-exempt interest and relates to interest-bearing investments you hold with state and local governments, such as municipal bonds.
See this TurboTax tips article for more information.
If you have a 1099B with interest and gains from US Savings Bonds and T Bills, you can exclude them from New Jersey income in the New Jersey interview. When you get to the New Jersey state interview, you will see a screen, "Disposition of Property" that asks you to check the corresponding box in the Omit column to exclude the listed sale from New Jersey tax if it is nontaxable by that state (see screenshot):
Most investment income is taxable in New Jersey as interest, dividends, or capital gains. However, some interest income is exempt from tax, including:
- Interest and gains from government debt obligations (such as bonds) of the State of New Jersey or its political subdivisions. These subdivisions can include municipalities, counties, school districts and authorities
- Interest and gains from debt obligations of the federal government, such as U.S. Savings Bonds and Treasury Bills
