Computing MD Exclusion for US Obligations

[kll2009]

For MD, which box (or boxes) on form 1099Div is used to compute amount of US obligation income to be excluded from MD tax liability? 

[AmyC]

MD exempts the interest in box 3 and the dividends in box 11 on the 1099-DIV. When you mark it correctly in the federal section, it shows up automatically in the state section.

If you are not seeing that automatically, please return to the federal section. Edit the 1099-DIV and follow these steps.

You should have income in either box 3, box 11 or both.

Continue

When you entered the box 3 or 11 dividends on the federal, the next screen asks Tell us if any of these uncommon situations apply to you and you select either US Government interest or need to adjust these dividends.

• If Government interest:
  •  the next screen asks how much from your state in Enter US Government interest
  • continue,
  • Tell us more about your exempt-interest dividends,
  • choose one state or more than one,
  • continue
• If you chose need to adjust these dividends:
  • then select I need to adjust these dividends,
  • continue,
  • enter the dividend adjustment
  • select Other adjustment
  • Continue
  • choose the correct option for your situation, one state or more than one
  • continue

You may also have 1099-INT box 3 interest that is exempt and must be marked in the federal section after entry.

[Edited 04/06/20 | 1:39pm PST]

[kll2009]

Now I'm confused. On my 1099Div, box 3 is nondividend distributions and box 12 is specified private activity bond interest dividends. Those boxes are blank. But, in the MD return, TurboTax tells me that "Capital gains from US obligations are tax free".  The tax info provided by the brokerage says that a small percentage of dividends from 2 of my mutual funds was from US government obligations.

[AmyC]

Yes, box 3 is for US Government bonds. I made a typo, box 11 not box 12. I am so sorry! That information needs to be entered in the federal program. Here is how:

Box 11 entry will ask "Which State are your $xxx of exempt interest-dividends from?

Select Maryland

Click Done

[kll2009]

Box 11 is blank on my 1099Div, as well, so it would appear that I don't have exempt interest/dividends. But why, then, does TurboTax tell me that MD doesn't tax *capital gains* from US obligations? I have capital gains in box 2a, and dividends in boxes 1a and 1b. And the brokerage reports on a separate page that 2 of the mutual funds with dividends and capital gains had some dividends from US government obligations.

[AmyC]

Do you have a1099-B? or a 1099-int? When you are in MD return, do you see a page like the first one I posted showing you the amount? Can you look at your paperwork and see what that number matches?

[kll2009]

My TurboTax screen doesn't show an amount, just the EDIT button. I have a 1099Div.

[AmyC]

Got it! What you need to do:

1. Go back to MD where it has the income that MD handles differently.
2. Locate the income form US Obligations
3. Click the Edit button 
4. (Click Continue if it shows the page for automatic handling of interest and dividends)
5. Capital Gains from US Obligations are tax free
6. This shows the full box 2a amount
7. Enter the amount from US Obligations from page 2 of your brokerage statement

[djw]

The US obligations exclusion (if applicable) are found only on form 1099-DIV?

Form 1099-B does not pertain to US obligation exclusions.

Is that correct?

[AmyC]

You could have 1099-B and 1099-INT as well. There are funds that invest in US obligations.