How do I handle Money Market Fund that had U.S Government obligation in New York State Return?

[Max Hope]

I have a Vanguard Federal money market fund (VMFXX) that had a U.S Government obligation of 49.37% for 2023.  The fund’s transaction type was Nonqualified dividend.  How is this taxed in New York State?  And how do I enter percentage of a U.S Government obligation in turbo tax for New York State return?

[LindaS5247]

Nonqualified dividends are taxed as ordinary income in New York State.  This should have been reported to you on a Form 1009-DIV. 

Nonqualified dividends are taxed as regular income and are subject to the same rate as the person's federal income tax rate, ranging from 10% to 37%.

Nonqualified dividend income is listed in box 1a of the 1099-DIV IRS form, while qualified dividends go in box 1b.

When entering your Form 1099-DIV you should see this prompt:

And then this prompt.  This is where you enter your Government Percentage Amount:

Note:  Keep a copy of your Brokerage Statement that shows the  % of the Government for your tax records.

You will see your dividends on your New York State Tax Return by clicking into Forms Mode (top right of your screen) and on the left panel, select your New York State Tax Return to view it.

This is how your New York State Tax Return will look:

For New York State you will not be able to claim those unless the your fund holds at least 50% of it's holdings in US Govt Securities. Some states only allow exemptions on dividends for those funds holding a minimum percentage, usually 50%, of government securities at the end of each quarter.

Click here for additional information on Form 1099-DIV.

Click here for additional information on taxes on dividends.
 

[Max Hope]

The prompt asks for the "amount" not the percentage.  Please confirm that I should enter the dollar amount. Not the percenatge.  I believe I should use the 49.37% percentage to calculate the dollar amount that is entered.

[crash12_mn]

I think what LindaS is saying is you cannot exclude ANY of the dividends from NY state taxable income since NY is one of three states that requires the fund hold at least 50% US Debt Obligations at the end of each quarter, which the Federal Money Market fund does not do. You would need to switch to the Treasury Money Market Fund which meets the threshold to avoid at least some of the tax in NY.

I also agree with you,enter the AMOUNT and not the percent. You would calculate the amount based on the percentage, but in this case I dont think it matters since NY would tax it all.