How is the accrued interest paid at the time of a bond purchase reported on Turbo tax?

[Snowman65]

I have entered the accrued interest as an adjustment on a 1099-INT form but Turbo Tax does not report this as a deduction or adjustment to interest paid?

[CatinaT1]

You are correct to enter this as an adjustment. The accrued interest paid is a subtraction from your total interest income and will be reflected in your net interest amount on Schedule B and on your 1040 form line 2b.  

Are you entering the information from a 1099-INT or from your statements? You can only deduct the accrued interest paid in the same tax year you actually received it.

After you entered the 1099-INT in TurboTax, did you check the box that says you need to adjust the interest reported on my form? 

When you check this box, the next screen is where you will indicate the adjustment amount and reason for the adjustment. Your reason is: "My accrued interest is included in this Form 1099-INT"

To see if the amount is adjusted correctly, follow these steps:

Go to the right panel and select:

1. Tax Tools
2. Tools
3. View Tax Summary
4. With the Tax Summary Open, you will see Preview your 1040, in the left panel.
5. Once the preview is open, scroll down to line 2b.
6. Is the amount listed on this line the correctly adjusted amount?

[SteamTrain]

Software Stuff to consider:

If it was for a Muni bond you bought ($$ in box 8), the software just reduced the $$ reported for tax-exempt $$ on the form 1040, line 2a.

If it was for a US Treas (box 3 $$) or Corporate bond  (Box 1 $$), the subtraction amount actually shows on the Schedule B, before transferring to line 2b of the 1040.

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A caution though.   If the 1099-INT has $$ in more than one box, of boxes 1, 3 and/or 8 you need to remove the $$ for the bond type involved, into it's own 1099-INT before making the adjustment for that bond type.  If you don't, then the software will apportion (improperly) the accrued interest among the box 1, 3 and 8 values.

Thus, if you have a 1099-INT with $$ in (say) boxes 1 and box 8, and you paid accrued interest on a Muni you bought in 2025....then you must take out the $$ in box 8 (&box 13 too), and put those $$ on their own 1099-INT before reporting the accrued interest for the Muni on that new 1099-INT.

____________________

Subject ...of course, to the limitation, noted by @CatinaT1  above, that you can only report that adjustment in the year you actually receive interest from that bond,   Thus if you bought a bond in Nov of 2025, and paid accrued interest on that bond....but it doesn't pay out interest to you until (say) Feb of 2026....then you can't declare that accrued interest deduction until you prepare your 2026 taxes.

[user17720242157]

I am having the same problem and spent over an hour on the phone with TT support yesterday without resolution.  

I split out the interest on two different forms for blocks 1 and 3 and their associated blocks 11 and 12.

For the "Total Accrued Interest Paid on Purchases" on schedule B, I used the "I need to adjust the interest reported on my form" when entering the information in the 1099-INT interest section for each form and split out the accrued interest between corporate and treasury bonds.

HOWEVER, the accrued interest numbers do not show up in Schedule B, Part 1 as a subtraction.  They are reflected in the total in line 2 but are missing as line items.  If I change the reason to "Other Adjustments", then the amount shows up as a subtraction.

Specifically:

Schwab (from block 1)   $20,003.10

Schwab (from block 3)   $10,383.71

[Missing subtraction of $835.31]

Subtotal  $30,386.81

ABP Adjustment -$452.47

Block 2:  $29,099.03

The block 2 is correct in that it subtract the missing accrued interest figure of $835.31 but it is not supported in block 1.

Again, if I change the reason to "Other Adjustments" then the -$835.31 shows up in block 1 and the numbers all add up properly.  I can't add a note or comment to say it is for accrued interest on purchases.

Appreciate any help on this. Thank you.

[DianeW777]

You can file your return without concern using the 'Other Adjustments' since you have the documents and information reflected as your accrued interest. Keep all the information with your tax file and you will need it when you redeem the bond because it will be part of your purchase price.

@user17720242157 

[XP666]

I log in to my 2025 tax return in Turbo Tax, where to go to do 1040X  for claim Accrued Interest as adjustment?

Thank you if anyone answer my question. I'll really appreciate your help.

[Snowman65]

Accrued interest on bond purchases is actually reported on a form 1099-INV. 

 SELECT "I NEED TO ADJUST THE INTEREST REPORTED ON MY FORM" AND ENTER THE ACCRUED INTEREST AMOUNT AS A POSITIVE NUMBER,  THEN SELECT "MY ACCRUED INTEREST IS INCLUDED IN THIS 1099-INT" AS THE REASON FOR ADJUSTMENT .

I BELIEVE THAT A 1040-X FORM IS USED FOR AMENDING A PRIOR YEAR'S TAX RETURN.

GOOD LUCK -

[JamesG1]

where to go to do 1040X 

Are you wanting to amend your income tax return?  Please clarify.

In TurboTax Online, report an IRS form 1099-INT and accrued interest as follows:

1. At the screen Now, let's review your 1099-INT, enter interest information.  Click Continue.
2. At the screen Do any of these uncommon situations apply, select I need to adjust the interest on my form.  Click Continue.
3. At the screen Tell us about your interest adjustment, enter amount and select My accrued interest is included in this 1099-INT.

If your return has been transmitted and rejected by the IRS, you can correct your tax return and re-transmit. 

If your return has been transmitted and accepted by the IRS, you will have to amend your Federal 1040 tax return.

If you used TurboTax Online, log in to your account and select Amend a return that was filed and accepted. 

See also this TurboTax Help.

@XP666