topic Treasury Bond Interest not transferring as a credit to State Tax in Get your taxes done using TurboTax

Treasury Bond Interest not transferring as a credit to State Tax

Penniless — Wed, 18 Feb 2026 20:16:10 GMT

Why is Treasury bond interest not being subtracted from my taxable income in my state tax form? I have the treasury bond interest correctly shown in Box 3.

Re: Treasury Bond Interest not transferring as a credit to State Tax

RobertB4444 — Wed, 18 Feb 2026 20:23:07 GMT

Which state form are you filing? On most of them you need to specify what portion of the interest in box 3 is exempt from tax.

Re: Treasury Bond Interest not transferring as a credit to State Tax

Penniless — Wed, 18 Feb 2026 20:40:30 GMT

Utah TC-40. 1099-INT Box 3 specifically states "Interest on U.S. Savings Bonds and Treas. obligations". Is there another Box that I need to fill in to confirm that the amount is 100% ""Interest on U.S. Savings Bonds and Treas. obligations" so that that amount is exempt from state tax?

Re: Treasury Bond Interest not transferring as a credit to State Tax

RobertB4444 — Wed, 18 Feb 2026 20:53:34 GMT

Yes. It should have carried over to your Utah return as 'tax-exempt' but since it didn't you should go to your state return to the section for "Here is the income that Utah handles differently" and scroll down to investments to make sure that the interest is excluded from the taxable state income.

Re: Treasury Bond Interest not transferring as a credit to State Tax

Penniless — Wed, 18 Feb 2026 21:14:00 GMT

There is a note under interest adjustment on the 1099-Int link that says "Enter any adjustment to your xxx interest as a positive number. If you need to add to the interest reported on this 1099-INT, enter the amount as a negative number." The amount in question was interest that was paid to the previous owner of the secondary bond before I bought it; and was reported on my 1099-B as "Capital Gains Accrued Market Discount". When I entered that amount as a positive number it correctly deducted that amount from my Federal tax, but on the TC-40 it simply isn't showing up as a credit against the income that bond earned.

Re: Treasury Bond Interest not transferring as a credit to State Tax

KrisD15 — Wed, 18 Feb 2026 21:55:24 GMT

Please enter the adjustment in the State section in TurboTax as a subtraction (there should be a screen for additions and a screen for subtractions) which should then show on your Utah TC-40 Part II (Code 71) "Interest from Utah municipal bonds and U.S. government obligations".

Re: Treasury Bond Interest not transferring as a credit to State Tax

Penniless — Wed, 18 Feb 2026 22:31:29 GMT

I'm not finding that screen that you are referring to, and I've been through the State tax walk-through three times. Please provide more information on how to find it.

Re: Treasury Bond Interest not transferring as a credit to State Tax

RobertB4444 — Wed, 18 Feb 2026 22:42:07 GMT

Are you using the TurboTax desktop version or online version?

Re: Treasury Bond Interest not transferring as a credit to State Tax

Penniless — Wed, 18 Feb 2026 22:51:08 GMT

online

Re: Treasury Bond Interest not transferring as a credit to State Tax

AmyC — Wed, 18 Feb 2026 23:09:07 GMT

When you enter the 1099-INT box 3 is automatically exempt in every state. I created a return and entered the 1099-INT with $150 in box 3 using the online version in federal income. I moved over to Utah, and the income shows as not taxed.

Next, I went to tax tools on the left, tools, preview and looked to see the money shown as a deduction.

Please review your Utah to see if your forms are similar to mine.

If you want to print or view your forms, including all worksheets:

In desktop, switch to Forms Mode.
For online:
1. On the left side, select Tax Tools
2. Select Print center
3. Select Print, save or preview this year's return
4. If you have not paid, select pay now.

Re: Treasury Bond Interest not transferring as a credit to State Tax

Penniless — Wed, 18 Feb 2026 23:41:57 GMT

The transfer of interest information to the state return, as you demonstrated, is working properly. I never had a problem with that. What is not working, as I noted previously, are the interest adjustments. I was told by you guys to put the interest adjustments in the "uncommon situations" screen. The screen says "Do any of these uncommon situations apply". I click the box "I need to adjust the interest reported on my form". then "continue". The next screen says: Tell us about your interest adjustment". I put in the dollar amount and select "My accrued interest is included in this 1099-Int". That is the problem. That amount is credit for interest that I did not receive, and it is not being subtracted from my state income.

Re: Treasury Bond Interest not transferring as a credit to State Tax

RobertB4444 — Wed, 18 Feb 2026 23:54:56 GMT

I'm not sure who told you that you need to adjust the interest using the uncommon situations screen. If you just leave it alone then it should carry over to the state return just as @AmyC showed you. Go back through those screens and undo all of that information and it should be on your Utah return just fine.

Re: Treasury Bond Interest not transferring as a credit to State Tax

Penniless — Thu, 19 Feb 2026 00:40:12 GMT

I must not be communicating clearly, because my question isn't getting answered, so let's start over: My original question was where do you put the “Accrued Interest Paid on Purchases” amount into your program? By way of explanation: When you buy a Treasury Bond on the secondary market the “Accrued Interest Paid on Purchases” represents the interest that had already built up before you bought the bond—money you essentially "pre-paid" to the seller. You must report the total interest received from the treasury bond issuer (which includes that "extra" amount you paid the seller), but you then subtract the "Accrued Interest Paid" on Schedule B. This ensures you only pay taxes on the interest that actually belongs to you. So... Does Turbotax have a box where I can put that number so that it gets added and subtracted from the right schedules?

Re: Treasury Bond Interest not transferring as a credit to State Tax

AmyC — Thu, 19 Feb 2026 01:04:16 GMT

Fresh start and I now understand that you have a 1099-INT with treasury obligations in box 3 as the starting point. Please follow these steps:

Open your return to the federal income section
Select your 1099-INT and see if you have entries in box 1 and box 3. If so, split your form into 2 entries. Create a form and enter the box 1 information and all other boxes with box 3 blank. Then create the 2nd form for box 3 income. It isn't necessary, usually, but it can prevent trouble.
On Tell us if any of these uncommon situations apply
select I need to adjust the interest reported on my form
Enter you accrued interest paid as a positive number
In the dropdown menu, select My accrued interest is included in this Form 1099-INT

Re: Treasury Bond Interest not transferring as a credit to State Tax

Penniless — Thu, 19 Feb 2026 02:07:07 GMT

Thank you. I have one remaining issue to resolve, but this may not be the forum for that question. When checking TurboTax's results I multiplied my taxable state income by our state tax rate (4.5%) but the Turbotax result doesn't match my manual calculation. Gotta figure out why.

Re: Treasury Bond Interest not transferring as a credit to State Tax

DawnC — Thu, 19 Feb 2026 02:43:11 GMT

Print out your state return and go through it line by line to verify all of your entries. On the Utah TC-40 Individual Income Tax Return, you multiply the amount on Line 9 (Utah taxable income) by 4.5% (0.045) to determine your preliminary state income tax. This is the figure calculated after subtracting adjustments and exemptions from your initial income.

Important: This result is not necessarily your final tax, as you may have credits (like the retirement credit) that reduce the total amount owed, see Utah.gov