CA Tax-Exempt Interest Not Working Correctly in TurboTax Premier?

[neworchid]

On the Federal section, I have specified California as the state for Tax-Exempt Interest (from Vanguard Consolidated1099) - it's 100% CA since it's from CA Municipal Money Market Fund.

On the CA state section, I have also specified "No, All Funds are 50% or More invested in California or US Obligations". I noticed that the checked box does not stick... it always remains blank even after I check it and go back to look.

However, the Schedule CA does not seem to exclude the CA tax-exempt amount because it uses the amounts from 1099-DIV Box 1a; if I understand correctly, this is the total amount that includes Box 12 - Exempt-Interest Dividends.

Is there a bug here, or, am I mistaken in my understanding about Box 1a including Box 12 amount?

Thanks for any help in advance!

[neworchid · Accepted solution]

It's working correctly.  Box 12 is not included in Box 1a  .... so the tax-exempt amount is not added to nor is part of the Taxable amount computation in Schedule CA.

[juleyh]

My 1099-INT on line 8 ...Tax Exempt Interest s $0.00, so why is the figure for Tax Exempt Interest Dividends showing instead?

I do not know what you refer to wth box 12 or 1A bc my 1099 s not broken out into boxes.

[juleyh]

I think Box 1a & 12 are on the 1099 DIV in T-Tax. However, that does not answer my question because the figure I am referring to would be showing on 1099-INT, which it is not.

[MonikaK1]

Yes, tax-exempt interest Dividends are reported on Form 1099-DIV.  If you are looking at a brokerage statement that doesn't clearly indicate what items go in which tax information return boxes, you could contact your brokerage for assistance.

If, for example, you have US Government Interest such as from a savings bond that you redeemed, e.g., a Series EE Savings Bond and it is reported as Dividends:

• Enter your Form 1099-DIV exactly as the boxes appear in the 1099-DIV section including exempt-interest dividends.
• Click Continue
• At the screen "Tell us if any of these uncommon situations apply to you", check the box next to "A portion of these dividends is U.S. Government interest". Click Continue.
• The next screen states "Enter U.S. Government Interest". Enter the amount in the box provided. Click Continue.
• The next screen asks which state(s) your exempt-interest dividends are from. You can enter the amount for each state here. Click Done.

The Learn More link in one of these steps explains:

The U.S. government taxes income you receive on its own bonds. Your state does NOT tax income from U.S. government bonds, but each state defines government bonds differently. You should check to see if any part of these dividends is taxable in your state. This information is usually included with the 1099 you received from your broker. You may also be able to get this information from your mutual fund company's website.

Based on this information, enter an adjustment for the amount your state does NOT tax, and the TurboTax State program will subtract this amount from your state income.

[TLin1]

Hi - I have a related question and hope you could please help me understand how TurboTax Premier works in this topic.  

On my CA return, TurboTax asked two questions about Tax Exempt Interest and Dividends.  Namely:

Question 1: Tax exempt interest from California sources of $xxxx transferred from your federal return.  Is any of this interest from funds with less than 50% of their assets invested in California and US obligations?   (Then, I am supposed to answer Yes/No to the question.  If yes, I am supposed to provide an amount of exempt interest not meeting the 50% requirements.)

Question 2: US obligations exempt-interest dividends of $yyy transferred from your federal return.  Are any of these dividends from funds with less than 50% of their assets invested in California and US obligations?  (Again, I am supposed to answer Yes/No and, if Yes, provide an amount.)  

I was able to figure out $yyy in Question 2 is derived from 1099-DIV and provide an amount.  So no problem there.  

But I was unable to do the same about $xxx in Question 1 from either 1099-DIV or 1099-INT and couldn't answer the question.  

Would you please shed light on from where and how $xxx was calculated?  I need to know which funds were being referred to in order to determine whether they met the 50% requirement.  

Thank you greatly for your help, 

Thomas

[neworchid]

Your brokerage may have additional forms or publications where they specify % invested in your state. 

For example, for Vanguard, they publish what's called "Percentage of dividends distributed by state by Vanguard’s municipal bond funds".  This shows several of their municipal bond funds and how much they're invested in each state.     https://investor.vanguard.com/content/dam/retail/publicsite/en/documents/taxes/inbst-2024.pdf 

Hope that helps.