Accrued Interest

When I buy a bond and pay accrued interest, because I purchased the bond in the middle of a quarterly cycle, and my brokerage firm does not factor out the accrued interest I paid in the total interest number they report when I download directly in Turbo Tax. How do I manually report the accrued interest I paid so it is not taxed?

516

Employee Tax Expert

Nov 16, 2022 1:02:47 PM

As you stated, you paid accrued interest to the seller of the bond. When reporting the interest on you 1040, you only report the interest in excess of the accrued interest. You are only paying tax on the difference between the total interest received less the accrued interest.

Expert Alumni

Nov 16, 2022 1:08:21 PM

You can enter the accrued interest adjustment in the 1099-INT section of TurboTax.

Follow these steps to make an adjustment for the accrued interest paid on your taxable bonds:

Select Federal Taxes
Under Wages & Income select Interest on 1099-INT
Enter your 1099-INT information, select Continue
Select I need to adjust the taxable amount, select Continue
Enter the accrued interest paid in the Adjustment box
Select the Reason for Adjustment as My accrued interest is included in this Form 1099-INT

Why sign in to the Community?

Accrued Interest