SC State taxes - where is deduction for "Interest from US obligations" requested in TurboTax program??

[leesho]

The SC state tax form allows deductions for interest from US Obligations.  This is identified in Line m that states:

"Line m: Interest from US obligations
Enter the interest income from US obligations that you reported as income on your federal Income Tax return. US obligations include savings bonds, treasury notes, and treasury bills. For more information see South Carolina Revenue Ruling #16-2 at dor.sc.gov/policy.
Interest income from the following obligations are taxable for state purposes:
• Federal Home Loan Mortgage Corporation (Freddie Mac)
• Federal National Mortgage Association (Fannie Mae)
• Government National Mortgage Association (Ginnie Mae)"

I don't see where TurboTax ever prompts you to input this information.  Every year I have to manually add it to the tax form.  Where does Turbo Tax ask for this information??

Thanks!

[ReginaM]

The data that you enter into TurboTax is for your Federal Return automatically populates your State of South Carolina Return.  There is no need to make separate entries for your Interest Income as it is entered by following these steps in TurboTax:

1. While in your Tax Home,
2. Select Search,
3. Enter 1099-INT,
4. Select Jump to 1099-INT,
5. Select Add a 1099-Int,
6. Make sure that Box 3 has been completed.This will then transfer over to 3 m of you South Carolina Return.

[leesho]

I don't think that you fully understand my question.  All of my interest income is from Edward Jones.  I used the feature in TurboTax to upload all information from my Edward Jones account.  I double checked and this was uploaded correctly.  The issue is that when I uploaded the state of SC Taxes on TurboTax, this program never asks me for the "Subtractions From Federal Taxable Income" Section, Line m "Interest income from obligations of the U.S. government".  This allowable subtraction is clearly shown on my Edwards Jones tax documents.   I have to switch over to the Forms section in TurboTax and manually input this allowed deduction.  This is an extremely popular deduction for SC taxes, but many people like miss it because the TurboTax program never asks for the information????  You will need to look at a SC Tax form to better understand my question.  Thanks!

[AmyC]

Yes, the SC form 502SU has a special box for Income from US Obligations worksheet under line aa. It is then carried to line ab. I used both interest and dividends to make sure the program is working correctly.You should not have to do anything.

This information then carries to the 502, line 13 with the proper codes. In this case, code AB is carried.

This follows the instructions MD offers here for MD tax forms., please see page 7 for full details.

[rvbodie]

You are answering a question about South Carolina using a Maryland return form.  The issue still exists that interest from US Obligations entered into the Federal income worksheet does not automatically populate Line 1-m on Form SC1040.  If one is not careful when reviewing their return, this deduction from Federal Taxible Income may be missed and result in less of a refund, or an increase in Taxes Due to the State of South Carolina.  There is no promt or question in the South Carolina program addressing this tax-exemp deduction.

[AnnetteB6]

If the interest from US obligations is entered into the Interest Income section and reported in box 3, then that amount is automatically entered on the SC1040 line m where it is subtracted from the SC taxable income.  There is no separate entry required on the SC return to enter this information and exclude the income from taxation in SC.

If your return is not automatically transferring this data, please consider providing us with a token number for a diagnostic file so that this can be examined further.  The diagnostic file will not contain personally identifiable information, only numbers related to your tax forms.  

If you wish to send a file, use the following instructions and then post the token number along with which version of TurboTax you are using and what state return you are filing in a follow-up thread.

Use these steps if you are using TurboTax Online:

• Sign in to your account and be sure you are in your tax return.
• Select Tax Tools in the menu to the left.
• Select Tools.
• Select Share my file with agent.
• A pop-up message will appear, select OK to send the sanitized diagnostic copy to us.
• Post the token number here. 

If you are using a CD/downloaded version of TurboTax, use these steps:

• Select Online at the top of the screen.
• Select Send Tax File to Agent.
• Click OK.
• Post the token number here.

@rvbodie 

[rnewsome]

Turbo tax does not automatically populate income derived from Federal obligations to your state tax return.  For instance, I have investments in the Vanguard Federal Money Market Fund.  The Vanguard brokerage statement lists all distributions from this investment as non-qualified dividends.  However, in 2024, approximately 60% of these distributions were derived from Federal obligations.  In fact, many funds have distributions that involve income from Federal obligations.  Vanguard, as well as most brokerage companies, publish supplemental reports showing the amount of total distributions derived from Federal obligations.

THIS IS A BIG PROBLEM THAT I SEE FOR TURBO TAX USERS.  Unless Turbo Tax asks for this data on the state tax return review, many users are not going to input this number and will ultimately overpay their state income taxes.  

In my case, I had to override the amount that was carried over from my Federal return, and then Turbo Tax flagged it as a possible error on the final review.

I strongly suggest that Turbo Tax re-installs this question about income from Federal obligations in its state tax return walk through.

[SteamTrain]

@rnewsome 

TTX does Handle it...but many people don't realize it's handled on a follow-up page when you enter your 1099-DIV form in the Federal section.  

(examples are from a prior year desktop software..but this year's "Online" software looks and handles very  similarly)

________________________

1) you enter your 1099-DIV as usual  (picture 1 below)

2) On a page after the main 1099-DIV, you check the box indicated. (Picture #2)

3)  Then on a later page, you will be able to enter the sub-amount of box 1a$$ that were US Obligation $$. (Picture #3)

Then, those $$ should carry to into the proper area on any state's forms.

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