Entering Tax Exempt Interest in Turbotax Deluxe

[creswela]

I am a taxpayer in Oregon using Turbotax Deluxe, and I own mutual funds that generate some of their income from US Government securities. It is my understanding that income from US government securities is not subject to Oregon state tax.

I received supplemental information from the funds which allows me to calculate the income from government securities for each fund, and I have done that, however I cannot find where to enter the resulting information in Tubotax. Where do I enter this income? I have gone through the income sections of both the federal and state dialogs, but I cannot find a place to enter this information. Assistance will be appreciated-Thank you!

creswela

[baldietax]

find the 1099-DIV which reported this income, when you edit that 1099-DIV and select 'continue' on the screen with the amounts/boxes you should get some interview questions whether some of this was US Government Interest and then get a supplemental box to enter the $ amount.

If you on desktop a quicker way is to go to Forms mode, select the 1099-DIV worksheet underneath Schedule B and there will be a place to input it right at the top under Box 1a.

[baldietax · Accepted solution]

actually ignore my comments about Forms, it's better to input it in EasyStep rather than Forms.  When you do it in Forms there is a checkbox which doesn't get set up and the 1099 will end up needing review and go thru the interview process anyway to fix it.

[AmyC]

Your 1099-INT box 3 shows interest on US Savings Bonds, Treasury bills, bonds, notes. Interest on US Obligations is not taxable at the state level but is taxable on your federal. This income is not included in box 1.

Your 1099-DIV

box 1a shows ordinary dividends. This income is taxable to the federal but may not all be taxable to the state. Your supplemental pages will show if you have US Obligations in box 1. In that case:

1. on the next screen uncommon situation
2.  select a portion is US Government interest.
3. Continue.
4. Then enter the interest.

box 12 shows exempt interest from dividends or other Regulated Investment Company (RIC). This income is not taxable to the federal and may not be taxable to your state.

There should be a guide showing the percentage from your state. If a portion isn't taxable to your state, enter the income for your state. If you lived in more than one state, continue adding states. The last option is multiple states for the rest of the income.

You should not be changing your 1099-INT and 1099-DIV form entry but you should be allocating the amounts in the program.

[Edited 4/1/2025 | 8:27 am PST]

[baldietax]

@AmyC I think you're referring to munis but @creswela is referring to US Gov Obligations / Treasuries.

[creswela]

Thank you baldietax, I clicked through the Easystep button for my 1099-DIV, and arrived at Box 12 - Exempt Interest Dividends; entered my data there, and it went through and lowered my state tax liability, so now good to go - many thanks!.

[creswela]

Thanks for your reply AmyC, but I was able to follow Baldietax's suggestion and was able to arrive at the proper box12-Exempt Interest Dividends, and it appeared to work out ok...registered in my state tax return, & lowered my tax liability as expected. 

[rjs]

@creswela 

I have to agree with SteamTrain. Entering income in a different box than what is actually on the 1099-DIV is going to cause problems. The only "proper box12-Exempt Interest Dividends" is what's in box 12 on the 1099-DIV, if anything. It might look okay to you on your state tax return, but when the IRS compares the 1099-DIV to your federal tax return it won't match. If you enter the dividends in box 12 instead of box 1a you will probably get an IRS notice saying that you failed to report the dividends in box 1a, and telling you that you have to pay additional tax plus interest and penalties.

SteamTrain's screen shots are from Premier. You said you are using Deluxe. I don't know if the screens are the same in Deluxe, but there should be something similar.

@AmyC 

[creswela]

Thank you @AmyC  for your response; others have chimed in with additional information,  (@baldietax  @SteamTrain, @rjs) and I'm becoming confused as to how to proceed.  Initially you had commented thtat Turbotax Deluxe automatically handled my situation of interest from US Government secutites not being taxed by my state (Oregon), implying that I didn't need to enter additional information provided by my mutual fund company (Fidelity).  Is there is a way to find/verify that in TT Deluxe, or is that not neccesssarily the case?  

SteamTrain showed screens dealing with this in Turobotax Premier (that post doesn't seem to show up in this thread anymore) but my TTDeluxe screens do not show similarly in my dialog.  If I try to edit my Fidelity 1099-DIV information, the only relevant box that shows up is Box 12-Exempt Interest Dividends, and it contains a 0.00 value.in my 1099-DIV reported by Fidelity.  Other posters suggest it's not  a good idea to edit Box 12 in TTDeluxe, since that's not what Fidelity provided when reporting to IRS.

I hope the others might see this post as well, and pehaps provide some additional clarity as to how to proceed.

Thank You!

creswela

[AmyC]

Yes, I edited my post. I apologize for the confusion. I was looking at boxes 3 and 12 and they told me you were looking at box 1 dividends. 

I believe you have a 1099-DIV and box 1a shows ordinary dividends. This income is taxable to the federal but may not all be taxable to the state. Your supplemental pages show you do have US obligations and that amount needs to come off your OR return. 

In that case:

1. edit the 1099-DIV
2. review the numbers
3. next screen uncommon situation - they look a little different and the words vary a little by program
4. select a portion is US Government interest.
5. Continue.
6. Then enter the interest.

[creswela]

Thank you for your prompt reply; Unfortunately I don't see the same screens you reference in your response.  I do get the box that  I check to indicate my 1099 has information in additional boxes, and the less common items heading, but there is no field the enter US govermnent securities interest as your screen shows.  I'll add the screens below to show what I have:

additional boxes:

It almost appears I'm not in the proper place in the program, but I don't see anywhere else to enter the information I have...and I AM using Turbotax Deluxe!  Thank you in advance for any insight as to where I'm getting hung up.

creswela

[rjs]

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@creswela wrote:

It almost appears I'm not in the proper place in the program,

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@creswela 

You're right. You are not in the right place. You don't enter the U.S. securities amount on the same screen where you enter the 1099-DIV. Enter the information that's on the 1099-DIV, box by box, then click Continue. The next screen will ask about "uncommon situations." On that screen, check the box that says "A portion of these dividends is U.S. Government interest" and click Continue again. Then the next screen after that will give you a box to enter U.S. Government interest. You have to click through two screens before you get there.