US Government Obligations dividends

[jowilb]

Which dividends should be included for exemption from state (AZ) taxes (qualified, nonqualified, Section 199A dividend)? This is not for a business,

[Mike9241]

ask the source, they should have provided it.   some dividend income derived from US agencies may not be taxed exempt. only the fund can provide the information. of what dividends may be exempt from state tax. 

[jowilb]

My Vanguard 1099DIV combines several mutual funds in reporting. They provide an information sheet with the percentage of income from US government obligations from each fund that are exempt from state taxes.. The only way that I can see to determine this amount is to refer to the pages following my 1099IV, titled "Detail for Dividends and Distributions." That lists each fund's transactions as to dividends and capital gains. The information Vanguard provides says the percentages apply only to dividends, not capital gains. 

My question is: Should I include all types of dividends listed - Nonqualified, Qualified, and Section 199A dividends in my percentage calculations?  I spoke with a Vanguard rep and they provided no other help. Thank you.

[RobertB4444]

Arizona taxes capital gains the same as the federal government.  That's why you don't worry about them - there's no change.

Arizona does allow you to not pay taxes on dividends from US Government obligations.  

The amount of dividends included in your gross income is in box one of your 1099-DIV.  Those are your total dividends.  Some part of that number is qualified and some portion is 199A but for purposes of Arizona income the number in box 1 is what carries over.

After that you can deduct the portion of Total Ordinary Dividends that are generated by Us Treasury obligations.  There is a statement attached to your 1099-DIV.  This is where you go through that statement to find out how much of that is in there.

[jowilb]

Unfortunately box 1a is the total of several mutual funds in one brokerage account and each of those funds contain a different percentage of dividends from government holdings, which are not taxed in AZ.   Although on additional information sheets provided with 1099-DIV each fund has a breakdown and total of dividends; that total includes capital gains which I think are not exempt from AZ tax. So, I deducted the capital gains from the total dividends of each fund, multiplied that amount for each fund by it's individual percentage of government obligations (minus capital gains), and added those totals together. 

To complicate matters more, I have some breakdown sheets following my 1099-DIV which give the percentages of government obligations in each fund.  I also have the general Vanguard's Government Obligations information sheet giving the percentages of government obligations in each fund. They each have different percentages for the same funds. I called Vanguard on this and they told me to use the ones that came with my 1099-DIV.

I hope I did it correctly.  It would be great if there was a box 1a for each fund held within the brokerage account to easily calculate their individual percentage of government holdings.

[tta]

The "U.S. government obligations income information" sheet from Vanguard clearly says this:

Percentage of the fund’s total ordinary dividends derived from U.S. government obligations in 2024.
A state or local tax office or a tax advisor can help determine whether your state allows the exclusion of some
of or all the income earned from mutual funds that invest in U.S. government obligations. If your state allows an exclusion, refer to the next page for the percentage of ordinary dividends derived from U.S. government obligations that may be excluded for each fund that was invested in. To determine the portion of dividends that may be exempt from state income tax, multiply the amount of “ordinary dividends” reported in Box 1a of Form 1099-DIV by the percentage listed in the following table.
The amount of each ordinary income distribution you received is reported on your 1099:
• For Vanguard brokerage accounts: In the detail portion of your 1099 Tax Statement, see Details for Dividends and Distributions. For each fund, subtract from the Total Dividends and distributions any Long-term capital gains, or any Nondividend distributions, or both.
• For Vanguard legacy mutual fund accounts: See your 1099-DIV Box 1a, Total ordinary dividends.