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How do I properly exclude/allocate Dividend income from treasury obligations when I was a resident of two different states?

 I lived in two different states ( 7 months in MA, 5 months in NC) and had (for simplicity sake):

 

$6K Dividend income while living in MA, but $3K can be excluded since they are treasury obligations.

$4K Dividend income while living in NC, but $2K can be excluded since they are treasury obligations.

 

While filling out my federal return, I entered the total of $5K to be excluded for treasury obligations but TT is allocating ALL $5K to the first state return I started to fill out (MA).

 

There is a question that asks how much did I make in MA for "Part-year Resident and Nonresident Interest and Dividends"  which is $6K for me, but there does not appear to be a way to properly allocate that only $3K should be excluded (TT is choosing $5K).

 

The only way I believe I can do it is to remove the entire $5K exclusion from the federal return and enter into  TT in the state return under "Other Interest and Dividends to Exclude"  =  $3K.

 

 

 

 

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4 Replies
MonikaK1
Expert Alumni

How do I properly exclude/allocate Dividend income from treasury obligations when I was a resident of two different states?

Enter Form 1099-INT in TurboTax in the Federal section exactly as it appears, and answer the follow-up questions. The allocation of the exclusion, if needed, is made on the state returns.

 

Interest income from Treasury bills, notes, and bonds is subject to federal income tax, but is exempt from all state and local income taxes. See this IRS webpage for more information.

 

There are follow-up screens in that section that allow you to make any necessary adjustments. When you see the screen, "Do any of these uncommon situations apply?", select either I need to adjust the interest reported on my form or My state (ME, MD, MA, NH, NJ, or WV) doesn't tax all of this interest as applicable. Read the additional information at the Learn More links that appear on that screen. Depending on your selections, TurboTax provides additional entry screens for you to enter the amount of the adjustment and the reason.

 

When you lived in more than one state during the tax year, you should prepare the earlier nonresident/part-year resident state return first and then the return for the state where you lived at the end of the year, to get correct results. If you prepared them in the wrong order, you can delete them and start again.

 

Different states treat the income allocation calculation differently. Complete the TurboTax interview for the earlier state, and make the correct interest income adjustment where prompted. When that return is complete, then complete the state interview for the later state.

 

See this TurboTax help article for more information about splitting income between states.

 

 

 

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How do I properly exclude/allocate Dividend income from treasury obligations when I was a resident of two different states?

I understood what you wrote except there is no place during the MA interview to allocate the previously excluded income (entered in the federal return). There is a question in the MA return to allocate Dividend income so it only applies to MA but I don't see any place in TT to change the excluded amount carried over from federal to state so its allocated properly to both states.

 

I do see where to exclude additional income for MA, but the amount entered from the federal return for US debt obligations cannot be changed in the MA return. 

 

I end up with too much excluded state income for both states and no way to adjust it.

MonikaK1
Expert Alumni

How do I properly exclude/allocate Dividend income from treasury obligations when I was a resident of two different states?

I realized after I reread your similar question in another thread that this was a 1099-DIV not a 1099-INT. I apologize for the confusion. You can make the state allocation in the Federal section for a 1099-DIV with Treasury interest that needs to be excluded at the state level.

 

Is the US Government Interest such as from a savings bond that you redeemed, e.g., a Series EE Savings Bond and it is reported as Dividends? If so:

 

  • Enter your Form 1099-DIV exactly as the boxes appear in the 1099-DIV section.
  • Click Continue
  • At the screen "Tell us if any of these uncommon situations apply to you", check the box next to "A portion of these dividends is U.S. Government interest". Click Continue.
  • The next screen states "Enter U.S. Government Interest". Enter the amount in the box provided. Click Continue.
  • The next screen asks which state(s) your exempt-interest dividends are from. You can enter the amount for each state here. Click Done.

The Learn More link in one of these steps explains:

 

The U.S. government taxes income you receive on its own bonds. Your state does NOT tax income from U.S. government bonds, but each state defines government bonds differently. You should check to see if any part of these dividends is taxable in your state. This information is usually included with the 1099 you received from your broker. You may also be able to get this information from your mutual fund company's website.

 

Based on this information, enter an adjustment for the amount your state does NOT tax, and the TurboTax State program will subtract this amount from your state income.

Interest income from Treasury bills, notes, and bonds is subject to federal income tax, but is exempt from all state and local income taxes. See this IRS webpage for more information.

 

When you lived in more than one state during the tax year, you should prepare the earlier nonresident/part-year resident state return first and then the return for the state where you lived at the end of the year, to get correct results. If you prepared them in the wrong order, you can delete them and start again.

 

Different states treat the income allocation calculation differently. Complete the TurboTax interview for the earlier state, and make the correct interest income adjustment where prompted. When that return is complete, then complete the state interview for the later state.

 

See this TurboTax help article for more information about splitting income between states.

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How do I properly exclude/allocate Dividend income from treasury obligations when I was a resident of two different states?

This applies to a Treasury Money Market Fund 1099-DIV. Vanguard disclosed that 80% came from US Govt. Obligations.

 

I am using the ONLINE version and the question highlighted below does not appear during the federal return interview. I did enter into TT that I lived in two states. The TT questions for excluding income terminates after I click continue at the 4th bullet below  (Enter US Government Interest )

 

  • Enter your Form 1099-DIV exactly as the boxes appear in the 1099-DIV section including exempt-interest dividends.
  • Click Continue
  • At the screen "Tell us if any of these uncommon situations apply to you", check the box next to "A portion of these dividends is U.S. Government interest". Click Continue.
  • The next screen states "Enter U.S. Government Interest". Enter the amount in the box provided. Click Continue.
  • The next screen asks which state(s) your exempt-interest dividends are from. You can enter the amount for each state here. Click Done.

******* I AM NOT PROMPTED FOR THE LAST BULLET *******

 

Thank you for your help!

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