State tax filing

" Do the major brokerage houses compute this and include the amount on the 1099-INT Box 3?  Or do we have to calculate it?"

 

STRIPS are OID bonds with a special kind of tax treatment.

 

Even though you receive no interest payment each year you hold them the "phantom" interest has to be reported as income.  It will be reported to you on Form 1099-OID (not 1099-INT).  The amount on that form should be the amount you report as income UNLESS you bought or sold the STRIP on the secondary market.  If you did that, you may have to make adjustments and do additional calculations.

 

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"my zero-coupon treasury bill income was completely included in Box 3 of the 1099-INT. I didn't need to make any adjustments. "

 

As long as you didn't buy or sell this Treasury Bill on the secondary market, then yes, that's all there is to it.  Original issue Treasury Bills held to maturity are probably the simplest tax case of all treasuries.  It's all simply treated as interest that is state tax exempt.

 

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"Well, in my case, I did have treasury bonds too, which I unknowingly bought on the secondary market when they were ~3 months to maturity. So they "looked like" bills but actually weren't."

 

Ouch!  Rookie mistake there.  But that's how we learn!