topic Re: Indiana deduction in State tax filing

Indiana deduction

wrigley1 — Wed, 29 Jan 2020 14:13:07 GMT

Where is the Indiana deduction for US Government securities income? Turbo Tax is saying we have municipal income - not true and I cannot get to Schedule 2 of state return.

Re: Indiana deduction

SteamTrain — Wed, 29 Jan 2020 15:49:16 GMT

In the Federal section, it goes in at two possible places....that get transferred to the state forms as needed.

1) if you hold individual US bonds or saving bonds...those interest $$ must be reported in box 3 of a 1099-INT form. Only the box 3 $$ should get transferred to IN forms for an income reduction. (Box 8 is used only for individual Municipal bonds you may own that distributed $$. )

2) If you hold bond funds thru a brokerage or Mutual Fund company....all $ distributed from those funds are reported on a 1099-DIV form . All dividends from stocks and bonds that are Federally taxable sources are listed as a total in box 1a. IF 1a includes an US bond interest, you need to calculate what the sub-part is based on the information the Fund Company provides each year. Then, on one of the pages just after the main 1099-DIV software form, you check a box:

"A portion of these dividends is US government interest". which refers only to a sub-part of the box 1a value.....then a few pages later you get a box to enter your calculation of how many $$ that is....and that is the $ amount that should get transferred to IN forms for an income reduction.

IF you also have some box 11 $$ on the 1099-DIV form, those $$ only represent Municipal Bond interest from all the state bonds the Mutual fund owns...no US bond interest is included.

Re: Indiana deduction

wrigley1 — Sat, 01 Feb 2020 18:45:04 GMT

This was helpful in correcting the return. It would be more helpful and a double check if the Indiana return also asked the question if the income includes US govt. income. The program could show more items that are included on Indiana Schedule 2 so you have another place to make sure you get it right. Since we missed it on the Federal side, we could not correct it in the State return which is where it is deducted.