How do I calculate the portion of tax exempt interest dividends payable to Indiana from a municipal obligation mutual fund with obligations outside of Indiana?

[SteamTrain · Accepted solution]

1)...if you own individual Indiana bonds, you get the $$ from the supplemental information that your broker provides, and add them up..

2) IF you own Mutual Bond Funds, that are collections of bonds form many states....The Fund company provides sheets  that tell you what % came from each state for the total that the send out.  And you calculate it from that.

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Example:  You Received $1000 of tax-exempt $$ from Big-Muni Bond Fund.  They indicate that 2% came from Indiana bonds........ 2% of $1000 is $20, so you break out that $20 from all the rest.  You thus reduce your Indiana income by $20 and that saves you a whole $1 in Indiana taxes.

Lot of work for nothing...so unless the $$, or the % from Indiana bonds is a lot larger, then just select "More than one state" for all of it and move on 

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IF you do decide to break out your Indiana bond interest...here's an example for NC below.  You would only break out Indiana and the US Territories, and what is left is lumped together as "More than one state"