Federal Agency bond interest is not taxed in Virginia. How does Turbotax avoid taxing this interest on the Virginia state return ?

[LindaS5247]

Your federal bond interest should flow through to your Virginia state tax return properly.  

When you enter your Form 1099-INT into TurboTax the information and codes on that Form should properly determine the taxability to your state tax return.

For instance: Box 3 reports interest earned on U.S. savings bonds or Treasury notes, bills or bonds. Some of this may be tax-exempt.

Interest income from Treasury bills, notes and bonds is subject to federal income tax, but is exempt from all state and local income taxes.

Click here for 1099-INT information.

Click here for "A Guide to Investment Bonds and Taxes."

[VolvoGirl]

To get to box 3. Under the Received from box, you need to check the little box on the left for
….My form has info in more than just box 1 (this is uncommon).

[SteamTrain]

@VolvoGirl  @LindaS5247 

I think @Saml  is asking about US "Agency" interest, like from TVA bonds or Federal Home Loan Bank.  Those $$ are reported in box 1 of their 1099-INT forms, and TTX doesn't always have a way to take those $$ out of the state income.

Someone else for another state (don't remember which state) indicated there was an area in the state interview where those $$ could be removed as an "Adjustment" selection.  I know that my NC software doesn't have a place in the NC Q&A....but I can remove it in Forms Mode on the desktop software.

[SteamTrain]

@Saml 

Found it !!!   VA does have a spot during the VA interview:

See the final post here:

https://ttlc.intuit.com/community/taxes/discussion/re-agency-bonds-for-state-exemption/01/3227160/hi...

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The thing is, I don't know what happens when you enter that area of the VA Q&A.

...like if you only enter the "Agency" interest and ignore everything that was already covered properly for US Bonds/Notes in the Federal section.

[xxxxxcxxxxxxxx]

so in VA t-bills aren't subject to tax so do i click on "My state doesn't tax all of the interest" in which case VA doesn't show up as a choice "none appy" in which case they may apply state taxes which aren't due

[SteamTrain]

@xxxxxcxxxxxxxx 

The selection for "My state doesn't tax all of the interest" ?

That selection only applies to the states listed for interest that appears in box 1 of a 1099-INT, where that interest comes from certain "In-state" banks and credit unions located in their own state.   Most states will tax the interest from bank consumer accounts, no matter where the bank is located.

Interest from US Govt T-bills you own, or even US Savings bonds, should be listed in box 3 of the 1099-INT you received....and when entered there in box 3, those $$ are automatically either excluded, or subtracted by the software, from any state's taxable income in that state's tax return.

[SteamTrain]

The "US Agency" bonds we're talking about here refer to specific Non-US Treasury bonds, which sometimes requires special steps to deal with.

Things like, the TVA,  Federal Home Loan Bank,   FDIC, Federal Land Bank, Farm Credit Bank and a few others etc...

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But any $$ in box 3 of the 1099-INT will be handled automatically...as already noted in my earlier reply.