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Accrued Municipal Bond Interest impact on Modified Adjusted Gross Income

     I need help.  In 2022, I purchased a number of tax free municipal bonds and paid accrued interest and premiums.  The premium shows box 13 of the 1099-INT and is used in turbotax to reduce the tax free interest as it is received over time.  That is not an issue. 

     The tax exempt accrued interest shows as "amounts not reported to the IRS".  The accrued interest was paid in 2022 and the coupon interest is paid in 2023.  The reported 1099 tax free interest is included in my Modified Adjusted Gross Income (MAGI), which would now be overstated in 2023. 

     The inflated MAGI impacts a number of areas, including increasing my medicare premiums through IRMAA.  Shouldn't I be able to reduce my reported tax free income by the amount of accrued income paid?  Any help is appreciated.

3 Replies

Accrued Municipal Bond Interest impact on Modified Adjusted Gross Income

sorry you can not deduct for state/federal purposes the accrued muni interest paid on a muni bond until you receive your first interest payment on tht bond which will be in 2023. you can not use it to offset other muni interest received.

 

 

 

 

Accrued Municipal Bond Interest impact on Modified Adjusted Gross Income

Thank you.  I understand for 2022 but how do I handle it in 2023 when interest is received?  Not concerned with state tax effect, just trying to minimize the Modified Adjusted Gross Income calculation used on the federal return to determine future medicate premiums, etc...  Can the accrued interest be used to reduce the total amount of coupon interest received in 2023?  Otherwise the amount of  MAGI is overstated in 2023.

Accrued Municipal Bond Interest impact on Modified Adjusted Gross Income

the easiest thing is just to use a separate 1099-int for muni. then you can either do the netting yourself or use the accrued interest line.  the IRS does not get the details neither do the states 

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