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jakar
New Member

How do I determine tax exempt interest from California sources transferred from the federal returns?

 
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3 Replies

How do I determine tax exempt interest from California sources transferred from the federal returns?

not familiar with how this is handled for CA but generally I don't think the state programs have a worksheet to drill down the state taxable amount, you should have a line somewhere for additions to Federal income that is taxable on your state return.

 

Tying it back to Federal depends the complexity of your situation and I use a spreadsheet offline to tie the net amount back to 1040 Line 2a in total and then the state breakdown, but it should include:

1099-INT Box 8 less Box 13 less any accrued interest adjustments

plus 1099-DIV Box 12 amount for CA taxable bonds

plus 1099-OID Box 11 less Box 6/10 or other adjustments

 

But there are a few issues to be aware of:

1. If you have adjustments (e.g. accrued interest paid on an individual bond) to a 1099 which has multiple income types (e.g. Box 1 or 3 as well as Box 8 ) then Turbo doesn't know which box to assign the adjustment to and will spread it across all of them.   you need to split the 1099 in this case to isolate the income box with the adjustment.

2. if you have premium adjustments and hold multiple state bonds some CA exempt and some CA taxable, again Turbo doesn't know from the 1099 how to assign the premium to CA or non-CA bonds.  The only way to get an accurate tax for CA is to split the 1099 between CA and non-CA bonds.

3. For 1099-DIV Box 12 if you provide a state breakdown, at least on Desktop (not sure Online) there is a bug where it can get stuck assuming the entire amount is CA exempt.  If you are not seeing CA tax go up when entering the 1099-DIV Box 12 state breakdown that usually means this is happening.  See here for this issue

https://ttlc.intuit.com/community/taxes/discussion/re-how-to-enter-muni-bond-from-non-nys-sources-in...

jakar
New Member

How do I determine tax exempt interest from California sources transferred from the federal returns?

Thank you for your reply.

 

A TT professional answered my question and I located the information I needed in the Mutual Fund and UIT Supplemental Information pages provided by the my investment firm.  I had to aggregate the various percentages for my filing state and answer the question if it was greater than 50% or less than 50%.  This was a question I had not seen before.

How do I determine tax exempt interest from California sources transferred from the federal returns?

@jakar 

 

Yeah, for 1099-DIV, box 12 tax-exempt dividends from Mutual Bond Funds or Municipal ETFs....CA only allows you to exempt/specify the CA-bond $$ portion....ONLY if that mutual fund  has at least 50% of it's assets in CA State/Municipal obligations.  Thus, usually only CA-Specific Bond funds qualify for allowing you to  exempt any of their interest from being CA-taxable income.

 

If you happen to buy individual CA-Related bonds yourself, those $$ are reported in box 8 of a 1099-INT, and those $$ are allowed to be CA-Exempt.

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

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