Is interest on US treasuries tax exempt

[a4311904a]

Is interest on US treasuries tax exempt? It is listed in box 3 of my 1099B

[rnshroff]

i did not get 1099B because savingd bod are not redeemed yet

[CarolynB]

HI. According to the IRS:  Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. You should receive Form 1099-INT showing the interest (in box 3) paid to you for the year.

See this IRS article for more information

https://www.irs.gov/publications/p17/ch07.html#en_US_2016_publink1000171511

[too deluxe]

 The 1099-INT forms that I received from Treasury Direct does not have Boxes, it just shows Reportable Proceeds: $2,394.00.  How do I enter this into the Premier program so that  it does not get transferred as Taxable income on my Hawaii Tax return?

[ErnieS0]

Enter the amount in Box 3 - Interest on U.S. Savings Bonds and Treas. obligations. This will not make the amount taxable to Hawaii.

Awesome Community member @CarolynB is correct. Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. 

@too deluxe 

[amir8844]

How do I exempt interest income earned from treasuries on my MD income tax return?

[TeresaM]

For Maryland, you will mark this in the entry of the federal.  When you enter the Form 1099-INT, on the Do any of these uncommon situations apply? screen, mark the box for My state (ME, MD, MA, NH, NJ, or WV) doesn't tax all of this interest and select Maryland in the drop-down.  This will import into the Maryland return. 

[dla1]

Good luck getting an answer from Turbotax. I have the identical question pertaining to my Minnesota filing. That Treasury  interest on my federal return transferred directly to my state return. Impossible to find a pathway at Turbotax to answer our question - you cannot talk to a live person. I won't use Turbotax in the future for that reason. Dennis 

[DaveF1006]

Minnesota is not one of the exempt states listed above thus the treasury interest you earned is fully taxable in the State of Minnesota.

[dla1]

I am no "employee tax expert" but from numerous sources all over the internet (Investopedia, etc,etc) Treasury Bill interest  income is exempt from state taxation under federal law everywhere in this country. Please tell me where I may find information which authentically informs me this federal law does not apply to Minnesota. Thank you. Dennis A.

[ShirlynW]

It depends. Minnesota does tax interest income from Treasury Bills as @DaveF1006 previously stated. According to 2022 Minnesota Individual Income Tax Instructions, page 10, line 2, " Additions to income apply when federally tax-exempt interest dividends from a mutual fund investing in bonds of another state or its local governmental units." 

For more information

[dla1]

Thank you. I read page 10, line 2 to mean Treasury Bill interest (federally tax-exempt interest dividends)  would be taxable in Minnesota if those dividends were generated in a mutual fund held by me. In my case, those  dividends were paid directly to me via my TreasuryDirect account - no mutual fund involved. So where in my Federal Turbotax Premier filing program do I enter this distinction so that this interest does not transfer to the Minnesota tax return?? Dennis A.

[GeorgeM777]

The process is essentially the same whether you are using TurboTax online or TurboTax CD/download.  After you have entered your Treasury interest on your Federal return, Schedule B, and all other income/deduction/credit items, you will then move to prepare your Minnesota return.  As you move through the screens in the MN section, you should see the screen, Income Allocations.  There will be two columns on that screen, one reflecting your Federal income/loss amounts and another column for those Federal amounts allocable to MN.  With regard to your Treasury interest, which should be reflected in the Federal column, enter a zero as the portion of your Treasury interest allocable to MN. 

MN Schedule M1M should reflect your Treasury interest as a subtraction from MN taxable income.  Line 7 of MN Form M1 (MN Individual Income Tax) will contain your Treasury interest amount; however, the line 7 amount, along with the amounts, if any, on lines 4 - 6 are subtracted from the federal amount when calculating MN taxable income. 

@dla1 

[ArcadiaSteve]

If you are receiving interest income from US Treasury bills, bonds, or notes, through Treasury Direct, the 1099-INT form is automatically generated a few weeks into each new calendar year. Pay close attention, because the interest you earn will be placed in the column of transactions that corresponds to **Box 3** , not **Box 1**. Box 3 income is free of state income taxes, whereas Box 1 income is just like a regular bank account and will get taxed by the state (if there is a state income tax). 

[ArcadiaSteve]

In Turbo Tax, the state-income-tax-free amounts just needed to be reported as coming from Box 3 (not Box 1)