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robtyates
Returning Member

Tax-exempt interest

Turbo includes tax-exempt dividends in the 1040 2a Tax-exempt Interest amount.  Presumably that is correct.  If so, it seems similarly logical to include tax-exempt capital gains in the 1040 2a amount.  When I donate appreciated securities to a qualified charity, I realize a  tax-exempt capital gain.  Turbo does not add that gain to 1040 2a.  Should I?  Doing so has no effect on my personal tax liability but does change the 1040 2a data, thus affecting whatever that data is used for. 

2 Replies
Opus 17
Level 15

Tax-exempt interest

Donating appreciated stock is not “tax exempt.” It is a tax deduction, which means something different. The stock donation is listed on schedule A as a charitable contribution and the details are reported on form 8283. You only get an actual tax benefit if the total itemized deductions on schedule A is more than your standard deduction.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Mike9241
Level 15

Tax-exempt interest

just one of the many odd tax laws. assuming that you donate a security held long term with a FMV of $5,000 and a tax basis of $3,000, you get a $5,000 deduction on schedule A without getting taxed on the $2,000 gain. it is properly not reflected on line 2a.   for some calculations the amount on line 2a is used to calculate Modified Adjusted Gross income.  

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