portion of 1099 int state tax exempt

[ambuckle]

Fidelity issued me a 1099 int with 4k of interest. 1k are from agency bonds not taxable by state. if i click on my state doesn't tax all of this interest, 100% of the interest gets deducted from the NJ return. It seems to be an all or nothing option. Turbotax was not helpful. Suggested it was a fidelity issue. I'm concerned about changing information on the 1099 so turbotax will correctly calculate it (seems to work if i deduct the agency bond interest in the amount of interest in box 1 and then add the agency interest to box 3 (int on treasury obligations). That's how vanguard handled it. I guess other option is breaking the interest up into 2 separate 1009 int entries?

[ThomasM125 · Accepted solution]

It would be best to break the entry into two Form 1099-INT entries. The IRS will compare the total of the Form 1099 entries reported to them with the total income category amounts reported on your tax return to insure you reported everything. So, as long as the totals are correct you can spilt Form 1099 entries into several parts.