US Government Obligation AND Intangible or Personal Property Tax exclusions

[jr72]

I have a letter from Vanguard saying that I might have exemptions from a list of funds provided.  The letter continues with income derived from US government obligations are exempt.  So, I have to call my state, Alabama, and see if that's true.  From what I see online, I think I am exempt.

Also, the letter says that certain states and municipalities require residents to pay intangible or personal property tax.  If I pay these, then I can exclude these.  So, I have a few questions on this.

• I've never seen this on my monthly financial statements.  So this doesn't apply to me.  Right?
• Or am I not understanding what this means?
• Or does this only apply to businesses?
• If I was paying this, where would I see it?

[ErnieS0 · Accepted solution]

Certain dividends, called exempt-interest dividends, contain investments that are not subject to federal income tax. Your mutual fund may include dividends derived from interest on United States obligations and/or Alabama municipal obligations which are received from a regulated investment company.

Compare the letter from Vanguard against your investments. If your portfolio includes investments mentioned in the letter, then a portion of the dividends from your mutual funds may be exempt from state tax.

Do not call Alabama. Call Vanguard or check their Tax center for U.S. government obligations information.

Exempt-interest dividends are reported in Box 11 of Form 1099-DIV. However, you will need more information from your mutual fund company to allocate amounts to Alabama.

Refer to Tell us more about your exempt-interest dividend for more information.

Intangible personal property is not subject to tax by Alabama. All taxable real and personal property, with the exception of public utility property, is assessed on the local level at the county courthouse with the county assessing official. The lien date for taxes is October 1 and taxes are due the following  October 1.

[jr72]

So mutual funds in this case are intangible personal property and not subject to tax from the way I'm reading.  But the page says "Every individual, firm, or corporation owning business personal property in Alabama on October 1 of each year is required to report personal property."  I don't remember paying anything Oct 1 or Dec 31.  I don't own any business property.  So this doesn't apply to me.  Right?

I guess the take away on all of this is that my specific dividend can have a percentage tax exempt and I can take a deduction on intangible personal property on my state taxes based on whatever that percentage is too.

I will mention that my Box 11 of Form 1099-DIV is zero.  In fact, all the 1099-DIV forms I have that have exempt-interest dividends have this as zero on 1099-DIV.  My investment has no bonds so that is probably why this is zero.  It a Cash Reserve Money Market that I'm trying to do an exclusion.  So I don't need to worry about Box 11 being zero.  Right?

I do have the table with percentages so I presume I would use that to figure out the amount regardless of box 11 being zero.

[jr72]

I think I made this all more confusing than it needs to be.  On the link you provided, it says this.

"Intangible personal property includes an owner’s representation of rights to property such as shares of stock, annuities, patents, market certificates, etc. Intangible personal property owned by businesses is not taxable under the property tax laws of this state."

And you mentioned, "Intangible personal property is not subject to tax by Alabama". 

My letter from Vanguard says, "Certain states and municipalities require residents to pay intangible or personal property tax. If you’re required to pay either of these taxes, refer to this column for the percentage that may be excluded from these taxes for each fund in which you’re invested."

So, since intangible property tax is not subject to tax in Alabama, I can't deduct anything.

Yeesh, I wish I would read things more clearly.

So in the end, I can only deduct the percentage on the dividends, which isn't much.  But at least I know the rules of the state tax laws now.