Ohio IT K-1 Federal Interest

[outviam]

My spouse received income from a trust for inheritance in a federal and Ohio K-1. We're unsure how to account for this in TurboTax, and where to enter it.

We live in NJ full time and the trust is in Ohio. She received a 2025 federal Schedule K-1 (Form 1041) and also an Ohio IT K-1. The federal K-1 was entered as income in the federal return. The Ohio K-1 shows $800 of Ohio income in Part IV (Investor's/Owner's/Beneficiary's Share of Ohio income) box 2a (Pass-through entity / electing pass-through entity / trust & estate income) and box 2.d (total taxable income). The federal amounts are the same. Box 6 (nonrefundable business credits) lists "Federal interest and dividends exempt from state taxation" with an amount of $710. My spouse's income distribution percentage is 0.05%.

The "Income Allocations" page in the Ohio interview allows specifying the amount of wages, salaries, tips, guaranteed payments that are federal income and Ohio income. The Ohio K-1 shows $800 Ohio income in box 2a/2d, but if the federal interest portion is able to be deducted, then I'm assuming this would lower the net Ohio income to $90. I'm not sure what to enter into income allocations ($800/$90) or if the income should be accounted for in a different area of TurboTax.

Any help is greatly appreciated, thanks!

[DianeW777]

Yes, here is the answer for you.

First you have to know how much of the exempt interest and dividends is the Ohio (OH) portion. The full amount is not likely to be fully exempt from either state. As a rule, there is a statement that provides the percentage of exemption for each state. Confirm this with the company who prepared the return.

If you find that the full amount of $710 is exempt from OH (and IL) then you can enter the net amount in the OH return. Double check your OH return before filing.

Note: If your OH return asks you check a box in reference to the Ohio IT K-1, which may prevent e-file, you can try to file without checking that box. It's a form you can keep in your tax file until and unless Ohio makes a request since it's not mandatory for every scenario. Attaching it can prevent the need for the Department of Taxation to request additional information. It's all right to keep it until then.

Preview allows for both federal and state returns if both have been completed:

From the left rail menu in TurboTax Online, select Tax Tools (You may have to scroll down on the left rail menu.) 

1. Select Tax Tools
2. On the drop-down select Tools
3. On the pop-up menu titled “Tools Center”, select View Tax Summary 
4. On the left sidebar, select Preview my 1040 

For TurboTax Desktop, change to 'Forms' and review the forms                      

[outviam]

Thank you. I'll check with the company that prepared the return. If I can't find the information, would the conservative approach be to asssume that none of the $710 is exempt? In that case I'd be overpaying Ohio by likely less than $25.

[DianeW777]

Yes, you may want to take the conservative approach with nothing to provide clarity. All of the income would be taxable and none is exempt if the company cannot provide the answer.

@outviam