Why did TurboTax 2025 desktop not include my $907.00 in taxable interest on line 5 "Mass. bank interest" on MA Form 1, page 2 when it prepared my 2025 MA return?

[be_rich]

It did include the taxable interest on line 2b of my Form 1040 of my federal tax return.

[RobertB4444]

Massachusetts exempts interest earned on Massachusetts state and local bonds as well as federal obligations.  If the $907 was earned on a state bond then it's been removed for good reason.  If not then it may be that the system thinks the interest is on a state or local bond and you may need to go back to where you entered it and change the answers that were entered.

[be_rich]

Thank you for your reply.

I used TurboTax Premier 2025 desktop version's Step-by-Step method to work on my 2025 taxes. TurboTax asked me questions, and I entered my answers to those questions.

After I entered my Personal Info, the next section was the Federal Taxes section.

In the Interest and Dividends section, the first item is "Interest on 1099-INT." My wife and I both bank at the same Massachusetts bank. My wife received a 1099-INT form for her two accounts at our bank. Her 1099-INT form reported $841.75 in interest for her two bank accounts. I also received a 1099-INT form for my account at our bank that reported $54.13 in interest for my account. $841.75 in interest for her two bank accounts plus $54.13 in interest for my bank account = $895.88, which rounds up to $896.00 in interest for our bank accounts.

I also received a 1099-INT form for my brokerage account that reported $11.41 in interest. So the total of $896.00 for our bank accounts plus 11.41 in interest from my brokerage rounds up to $907.00.

That is the total amount of interest that was reported to us on 1099-INT forms, and that's the amount I entered as 1099-INT interest in TurboTax.

We don't own any Massachusetts state or municipal bonds, so none of our interest was from state or local municipal bonds.

In your reply you said that "Massachusetts exempts interest earned on Massachusetts state and local bonds as well as federal obligations. If the $907 was earned on a state bond, then it's been removed for good reason. If not then it may be that the system thinks the interest is on a state or local bond and you may need to go back to where you earned it and change the answers that were entered."

In the paragraph above, are you saying that Massachusetts does not tax interest earned in Massachusetts banks? 

If that were true, why does MA Form 1, pg. 2 have line 5 "Mass. bank interest" in the same section as line 3 "Wages, salaries, tips" and line 4 "Taxable pensions and annuities"?

I looked at some MA tax returns for previous years filed by a CPA we used to use, and every year our interest from Massachusetts banks is reported on line 5 "Mass. bank interest."

Thanks,

Bert

[CatinaT1]

Robert said "Massachusetts exempts interest earned on Massachusetts state and local bonds", not banks. Bank interest is taxable.

[be_rich]

Thanks for confirming that for Massachusetts state income tax that Massachusetts bank interest is included and taxable.

Having confirmed this, I still have my original question:

I included all the interest reported on all my 1099-INT forms in the interest section of TurboTax, and TurboTax included it when it calculated my federal taxes.

However, when TurboTax calculated my Massachusetts taxes, it did not include the interest I reported for Federal taxes on my Massachusetts Form 1 on line 5 "Mass. bank interest," where it's seems it should have been included.

This seems like a TurboTax bug to me, and from the replies I've received to my original post and replies to it, I have not heard that the problem is something I did incorrectly.

Where would I report this issue as a TurboTax bug?

Also, what would I do differently in the future so that the interest I report for my federal taxes DOES get carried over to lIne 5 "Mass. bank interest" on my MA Form 1?

Thanks again for everyone's replies and help with this issue.

[DoninGA · Accepted solution]

@be_rich After you completed entry of $907.00 interest on the Form 1099-INT, the following screen Do any of these uncommon situations apply? has a check box labeled My state (ME, MD, MA, NH, NJ, or WV) doesn't tax all of this interest.

Did you check that box?

[be_rich]

Thank you very much for your reply, which was correct.

After I entered my three 1099-INT forms, I did NOT check the My state (ME, MD, MA, NH, NJ, or WV) doesn't tax all of this interest box on the later screen. I must have missed that option somehow. 

After I checked the My state (ME, MD, MA, NH, NJ, or WV) doesn't tax all of this interest box and chose Massachusetts bank interest in the dropdown box below it, I did a new federal review. After the federal review completed without any errors, I switched from Step-by-Step view to Forms view. Then when I opened my MA Form 1 in TurboTax, the correct interest was reported on line 5 "Mass. bank interest."

Thank you for helping me fix this problem.

I greatly appreciate it!