How are ordinary dividends the are derived from US government obligations excluded from NJ Income? Is the amount subtracted from the total amount of dividends that are reported on line 17 of Nj 1040?

[rjs · Accepted solution]

Yes, that's exactly what happens. The dividends that are from U.S. government securities are excluded from the dividends reported on NJ-1040 line 17. They are reported as tax-exempt interest on NJ-1040 line 16b, which is not included in total NJ income.

After you enter a 1099-DIV in the federal section of TurboTax, the next screen asks "Do these uncommon situations apply?" Check the box that says "A portion of these dividends is U.S. Government interest." One or two screens later there is a box to enter the amount of U.S. Government interest. The adjustment will be made on the New Jersey tax return.

[etrtca]

According to my CPA, you can only enter the dividends that are derived from US government obligations as excluded interest on line 16B since they are interest, and you CAN NOT subtract them from the total amount of dividends reported on line 17 (same figure as Federal dividends). Please clarify.

[rjs · Accepted solution]

The dividends that are derived from U.S. government obligations are not taxable on your New Jersey tax return. If you do not subtract them from NJ-1040 line 17 you are paying tax on them, unless they are somehow excluded from NJ income somewhere else. The amount on line 17 is included in your NJ taxable income.

This TurboTax support community is run by Intuit, the company that makes TurboTax, to help its customers use TurboTax to prepare their own tax returns. Apparently you are not using TurboTax. TurboTax would subtract the dividends from U.S. government obligations from line 17 if you enter them as I described in my first reply above. We cannot advise you on how your CPA prepares your tax returns.

Your original question was how the dividends derived from U.S. government obligations are excluded from NJ income. I have explained how TurboTax excludes them. Ask your CPA how he or she excludes the nontaxable dividends from your taxable NJ income if they are not subtracted from line 17.