Why do I need to pay tax on accrued market discount of treasury bill for PA tax filing?

[wendyle1993]

Total Accrued market discount not reported on Total 1099-INT, but reported as ordinary income. That amount is added to my tax basis for PA filing. But this is related to the government treasury bill. Should that be exempt of PA tax?

[baldietax]

if you're referring to the AMD on a Treasury Note reported in Box 1f on 1099-B there is general ambiguity about the state taxability for AMD as it's not interest paid directly by the US Gov, it depends on how the state tax codes are written and interpreted, or litigated in the courts (e.g. NC litigated explicitly that it's taxable).

Turbotax generally doesn't treat it as state exempt and the state programs are all slightly different how they handle adjustments/workarounds if you consider it exempt for your state.   The main workaround is usually to enter it as a manually/miscellenaeous subtraction from Federal income on your state return, tho some states vary in their handling of this (e.g. in NY it precludes e-file).  You could also possibly include it as US Gov Obligation $ on a 1099-DIV which does not affect your Schedule B reporting.

There's a lot of threads on this, here's one for NJ

https://ttlc.intuit.com/community/state-taxes/discussion/re-accrued-market-discount-on-us-treasuries...

Treasury Bills specifically are usually reported on 1099-INT Box 3 but brokers may vary how they handle it on 1099B I think.  Bills are specific zero coupon issues less than 12 months to maturity which are explicitly excluded from "market discount bond" rules and the income is regarded as "interest" - see Pub 550 for more details.

https://www.irs.gov/pub/irs-pdf/p550.pdf

[user17761780762]

I'm in NJ but assuming Turbotax PA works the same - 

In Forms, not the walk through mode,  forms - find INT/Div Wks.  Open that.

Under Interest income right at the top. There's payer's name and a column  to check x if tax exempt.  

My accrued market discounts were all labeled that under payer name. Check the x box and they become state tax free.

This should work. 

Someone else found this. 

Why TT never erases all the wrong answers here I don't know. 

[baldietax]

all the state laws and tax programs are different, good that NJ has a feature for this but that doesn't necessarily apply elsewhere or make other answers incorrect.