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sgabovich
New Member

Backing out Agency Bond Interest collected (Farmer MAC, FHLMC, etc) for NJ Sate Taxes

I am trying to figure out how to back out interest received on Agency securities from NJ Taxes.  Agency bonds are taxable at the federal level but are exempt from taxes in NJ.

 

1099-Int forms do not break out Agency interest and hence they get lumped together and appear as taxable under NJ state tax. Is there any way to adjust NJ taxes other than brut force going into the Interest Worksheet and entering it by hand?

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4 Replies

Backing out Agency Bond Interest collected (Farmer MAC, FHLMC, etc) for NJ Sate Taxes

I'll poll someone with NJ tax forms.

 

@rjs 

 I think you work with NJ forms.  Do you know of the NJ  section of the interview has a spot to remove US Agency  $$  from NJ income.   (FHLB, TVA bonds etc taht are included in box 1 of a q0990-INT)

 

Some states have an "adjustment" Q&A section.

 

Might need to check to see if NJ actually exempts those $$...I know my NC does not exempt Ginnie Mae, Fannie Mae, Freddie MAC (FHLMC in question above)

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

Backing out Agency Bond Interest collected (Farmer MAC, FHLMC, etc) for NJ Sate Taxes

NJ GIT-5 Lists FHLMC as NJ-taxable.

 

Table various agencies and whether NJ taxable....or not,, is on page 5 of the GIT-5

 

There's a link to the NJ Git-5 towards the bottom, last text sentence on this NJ DOR web page:

 

NJ Division of Taxation - Exempt (Nontaxable) Income

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
rjs
Level 15
Level 15

Backing out Agency Bond Interest collected (Farmer MAC, FHLMC, etc) for NJ Sate Taxes

Here's how TurboTax handles interest that is not taxable in New Jersey. I am not expressing any opinion about what interest is or is not taxable. The Help in TurboTax also refers you to Bulletin GIT-5.


After you enter a 1099-INT in TurboTax, when you click Continue the next screen says "Tell us if any of these uncommon situations apply." On that screen check the box that says "My state doesn't tax all of this interest." You will then get a drop-down list of states. Select New Jersey and click Continue.


This will exclude the entire 1099-INT box 1 amount from the taxable income on your New Jersey return. (It will be shown as tax-exempt interest on NJ-1040 line 16b.) In spite of the wording on the uncommon situations screen, I don't see any way to tell TurboTax that only part of the interest is not taxable in New Jersey, not even on any of the worksheets in forms mode. If you need to do that, I think the solution is to enter it as two separate 1099-INT forms, one that is taxable in NJ and one that is not. I don't think that splitting the 1099-INT will cause any problems.

 

sgabovich
New Member

Backing out Agency Bond Interest collected (Farmer MAC, FHLMC, etc) for NJ Sate Taxes

Thank you everyone for your responses.

I went through the Q&A multiple times and do not see "My state doesn't tax all of this interest" or any other options.  I ended up pulling up the NJ Interest worksheet and overriding the values.  I manually split the total interest into agency and non-agency, and NJ form allows you to enter (Taxable vs Non-Taable on it) and it appears to be flowing through correctly.  I do wish that 1099-Int would break out agency bonds as a separate category and wish there was an explicit entry in TT for the adjustment.

 

There was a typo in my original question above - while I am in no position to discuss what is and is not taxable, according to GiT5  FHLMC bonds are taxable in NJ while FHLB bonds and Federal Farm bonds are not.  

https://www.nj.gov/treasury/taxation/pdf/pubs/tgi-ee/git5.pdf

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