how to exclude U.S. Government interest from CA state income tax form?

[00p299]

Hello, I'm in the state of CA and through 2024 I held a money market fund (FDLXX) composed of mostly treasuries

Below is the % from the official Fidelity website

CUSIP, 31617H300 - 97.0032%

During the federal income tax section, I input the following

>> 1099-DIV 

>> Box 1a - Total ordinary dividends: $500.00 

>> Do these uncommon situations apply? A portion of these dividends is U.S. Government interest. 

>> 500.00 * 97.0032% = $485.016

Will turbotax automatically handle the state income tax portion or do I need to make sure to exclude the U.S. Government interest from my State income tax form?

What box should I look out for when filling out the state income tax? 

[baldietax]

you got it.  just to be sure on the source for the % you are using I think you gave a good number but it's just 97.00% no decimals, the official schedule for this is here which also has instructions on how to apply it

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/taxes/TY24GSESupplementalLetter.p...

this should carry over to your state return as a 'subtraction' to Federal income, not sure what line that is for CA.  Generally there is no drill down on state subtraction to show the details, and it will be a combination of 1099-INT Box 3, 1099-B Box 1a US Gov $ amount, 1099-OID Box 8 etc, less any accrued interest or premium adjustments for INT/OID.  If you have a lot of these you just need to keep track of the total you expect to see on state and reconcile back to your 1099s.

For most people it's usually an issue with accrued interest, if you have a 1099-INT with multiple boxes (1/3/8) and accrued interest adjustment then then 1099-INT needs to be split it as there is no way in TT to specify which box an adjustment applies to.

a few people have reported issues with imported 1099 adjustments for munis or treasuries not carrying through to state properly.  If you encounter that sort of problem the usual solution is to just re-input the 1099 manually and delete the old one.  This is relatively rare problem tho.

[00p299]

Thank you, I was able to figure out the process for that section

would you be able to help with a similar question? My HSA holds the same money market fund (FDLXX) and earned roughly $50 in interest as seen in my 1099-INT. Since CA taxes HSA gains are regular income, would I then do the following?

Here's the income that California handles differently

    Enter your health savings account earnings

        Interest earned from HSA: $50 * 3% =$1.50 

I multiplied by 3% since FDLXX is 97% treasuries -- hence 97% is tax exempt and I'd pay taxes on the other 3%.

[baldietax]

ok I can't help on the HSA question I'm not familiar with CA taxes and wasn't aware HSAs are taxable in this way.  The logic looks sound if Treasuries are similarly exempt here but they are usually exempt at the state level if taxed federally, here you have a oddball state situation where it's just being taxed at state level, I would check the CA tax code to see if there is guidance either way and maybe others will weigh in here.

[BillM223]

I believe that if you have a fund in which 50% or more of the items are generating interest and dividends that would be tax-free to an individual, that the interest and dividends as a whole are tax-free in California.

See R&TC §17145

But, of course, if you have multiple income sources within the HSA, then you will have to draw up a list and calculate the taxable and tax-free items, and enter the net amount in the CA state interview.

Also note that CA taxes all capital gains as ordinary income, so you don't have to worry about short-term and long-term gains. Just lump them all together and enter them in the CA state interview.