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Returning Member
posted Apr 12, 2024 11:33:11 AM

tax exempt interest pulled from form 1041, Estate/Trust is affecting tax liability

Hello,

 

When I enter $3937 in Box14 and designate it code A for "tax-exempt" interest on Form 1041 in Turbo Tax, it does not reflect in my taxable income, line 2b on 1040 (it does appear on 1040 line 2a). But it does make a difference in the amount I owe. In this case, it lessens the amount of my refund by close to $285.  Why is this? It seems like only the taxable interest should matter? FYI, the $512 taxable interest I enter does show on line 2b the 1040. Got any ideas?

0 2 4747
2 Replies
Returning Member
Apr 12, 2024 12:00:20 PM

Just an update... I can see that the tax exempt amount is getting added to my "modified" AGI on Form 8962 which is affecting my Premium Tax Credit. Can someone explain please??

 

Thanks!

Expert Alumni
Apr 18, 2024 10:00:54 AM

Yes, that's correct. 

 

Form the instructions for Form 8962:  "For purposes of the Premium Tax Credit (PTC), modified AGI is the AGI on your tax return plus certain income that is not subject to tax (foreign earned income, tax-exempt interest, and the portion of social security benefits that is not taxable)."