Glitch in State Tax Exempt Dividend 1099-DIV Box 12 - Using Turbotax 2025

[TtUser26]

Entered dividends that are state tax-exempt in Box 12 and selected state name from pull-down menu. But TT did not deduct dividends from my State income. It ignored Box 12 and treated dividends as taxable. 

Tried using Form 1099-DIV Worksheet to enter State ID, Percent of Dividends, and Amount of Dividends (Boxes 12a to 12c). Single state accounted for 100%. TT still did not deduct dividends from State income and continued to treat as taxable. Weird thing is it automatically doubled the dividends in the step-by-step mode. You'd think Federal tax would increase due to the doubling of dividends, but it was unaffected. Also weird.

Previous unrelated recos from Reddit: 1. Restart computer and WIFI; 2. Delete and re-enter1099 DIV info; 3. Delete cache; and 4. Prepare taxes on another computer. Tried 1 and 2, unsuccessful.

No issues identified by Smart Check review.

Called Turbo Tax Live Help line. Waste of Time.

Anyone else experience this? Any suggestions to resolve?

[NCperson]

@TtUser26  I think you are confused on what is occuring.

What is in Box 12 is NOT taxed by the Federal Government and if tagged 100% of it not to be taxable in your state then it won't be added to your home state either.  that is the way it works. 

What you are to be loading under box 12 is the percentage of the municipal income that is from your state.  If you own an ETF, only a small percentage of the this income is from your state, and the remainder is tagged with state XX and the remaining income.  The amount listed in state XX will be ADDED to your state income and nothing will occur to the income tagged to your home state. 

Look at your brokerage statement to determine what percentage of this income is from your home state. If this is Vanguard, they do a GREAT job of providing this information on their website. 

What state? 

[TtUser26]

Thanks for replying, NCperson.

I have the opposite situation with these dividends. They're taxable under federal but entirely exempt from state (HI @99.99%).

"What you are to be loading under box 12 is the percentage of the municipal income that is from your state." Box 12 is prompting a dollar amount, not a percentage.

No matter what dollar amount I enter in Box 12, whether it's the entire dividend or a portion, it won't reduce the federal or state taxes.

I used Form 1099-DIV Worksheet to enter State ID, Percent of Dividends, and Amount of Dividends (Boxes 12a to 12c). TT still did not deduct dividends from income and taxes were unaffected. 

Any further advice?

[NCperson]

<<I have the opposite situation with these dividends. They're taxable under federal but entirely exempt from state (HI @99.99%).>>

that is not possible. That is not how Box 12 is to be used. What is the name of the firm that is issuing the 1099-DIV?  Suggest contacting them because either your understanding is incorrect or they issued the form incorrectly. 

here are the Box 12 instructions: 

"Box 12. Shows exempt-interest dividends from a mutual fund or other RIC paidto you during the calendar year."

Why do you beleive the amount in Box 12 is taxable to the federal government?  if they are any sort of municipal bonds they are not taxable by the federal government by law.