Interest income exempt in NJ

[Lawrence V]

My broker reported in 1099-INT taxable interest in Box 1 and US Treasury interest in Box 3.  For Federal purposes, TurboTax adds them together.  For NJ purposes, TurboTax is putting both amounts as Tax Exempt Interest.  I think this is wrong. Only the Box 3 amount should be tax exempt.  The Box 1 amount should be taxable.  Does anyone else have this issue?

[ThomasM125]

After you enter your interest income in the federal section of TurboTax, you will have the option of saying your state does not tax the income as follows:

Once you check that box, your interest will show as tax exempt on the NJ form NJ-1040, line 16(b). The only problem is that it will exclude all of the interest. To correct that problem, you need to split the 1099-INT entry up into two entries, with one just reporting the income that is exempt in New Jersey.

[Lawrence V]

Thomas - that is exactly what happened.  I thought about doing what you suggested but won't IRS check that 1099 won't exactly match since split in two?

NJ is terrible tax state.  They should follow the federal more closely.  So annoying.

Thank you for your prompt reply.

[fanfare]

Don't blame New Jersey when TurboTax can't do it correctly.

Try a different tax software provider.

NJ follows the law by not taxing Treasury bond interest.

[scottyjay2]

This is an extremely confusing topic and answer.  Why would we need to enter the information twice.  As a matter of law all treasury bills are exempt from state tax so turbo tax should just take Box 3 AND NOT include it in state income.  I don't know how to get this right so I am likely going to need Live Assist just to answer this question.  Annoying and appears to be a turbotax limitation

[fanfare]

If this is still not fixed in current TurboTax, just use the suggested workaround.

if you [Removed solicitation] 

@scottyjay2 

[ambuckle]

I have this issue. 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. 

[AbrahamT]

Then that's exactly how you should record it.

[Mike001188]

This question hasn't been answered yet??

[DaveF1006]

According to NJ.gov, certain types of interest income are exempt from state tax. Specifically, interest and capital gains from obligations of the State of New Jersey or any of its political subdivisions, as well as from direct federal obligations like U.S. Savings Bonds and U.S. Treasury Bills, Bonds, and Notes, are not subject to New Jersey tax.

Is this the answer you are seeking?

@Mike001188