Compute US Government interest from Mutual Fund for New Jersey

[hero123]

Hi 

I live in New Jersey and seem like it exempts state tax from interest from US government. 

I called Fidelity and they said a Tax specialist could help me compute the US government interest for the following:

"Enter the amount of dividends reported on this 1099-DIV from NATIONAL FINANCIAL SERVICES LLC that represents interest from U.S. Government obligations."

The mutual fund, SPAXX has the following composition:

It also said the following:

"The Adviser normally invests at least 99.5% of the fund's total assets in cash, U.S. Government securities and/or repurchase agreements that are collateralized fully (i.e., collateralized by cash or government securities). Certain issuers of U.S. Government securities are sponsored or chartered by Congress but their securities are neither issued nor guaranteed by the U.S. Treasury. Investing in compliance with industry-standard regulatory requirements for money market funds for the quality, maturity, liquidity and diversification of investments. The Adviser stresses maintaining a stable $1.00 share price, liquidity, and income. In addition the Adviser normally invests at least 80% of the fund's assets in U.S. Government securities and repurchase agreements for those securities."

Given my dividend from it is $1000, how should I compute the number to enter in the turboTax stated in the beginning?

Thank you

Leo

[baldietax]

the source for the % is the tax supplement provided by Fidelity which lists the official % for every fund, along with guidance how to apply it, see link below.  (Fidelity should have directed you to this document rather than a tax specialist...).

SPAXX is not shown explicitly the have "various" for that fund you have to look up by name in this case, pls verify yourself but I also hold that fund and it should be 55.09%.  Multiply the dividends from that fund by that percentage.

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/taxes/TY24GSESupplementalLetter.p...

[DaveF1006]

First of all, you will record the 1099 DIV exactly as listed on the hardcopy. After you enter the information, there will be a screen that will appear. Here you will check a box stating A portion of These Dividends is US Government Interest.

Now you will add up all of the percentages regarding US Treasury Bills. The total should be 19.72%. Next screen will ask what is the amount of the US Government interest, you will enter ($1000)(.1972)= $197.

Once this is recorded, NJ will exclude $197 of  ‌dividend taxable income.  

@hero123

[baldietax]

@DaveF1006 that's not correct way to get the % and will significantly understate the state exemption in this case as it can be more than just T-Bills that qualify; prospectuses and other asset allocation information provided on fund websites should not be used .  The correct source is the tax supplement provided by the fund.

[hero123]

1099-Div has box1a which is total ordinary dividends and box1b is qualified dividends.

So I should use total ordinary dividends * 55.09% and enter this number?

Thanks

[baldietax · Accepted solution]

specifically the ordinary dividends (Box 1a) that were from this money market fund; if you had more than one fund hitting Box 1a then you need to find how much was from this fund only and multiply the % from this fund by that number.

If you do have something in Box 1b that implies Box 1a is a mixture of things also, as SPAXX will only post to Box 1a not Box 1b.

Check the details in the 1099 there should be a breakdown of the dividends hitting each box by holding and a subtotal for SPAXX in Box 1a - that's the number you need.

See also the instructions on the Fidelity link I posted.