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gtax0007
New Member

How do you properly calculate U.S. government interest from the 1099-DIV?

First question - I am a California resident and own now or did own a number of ETFs and funds in 2017 where some portion was U.S. government treasuries. Is it as simple as going through each fund and looking at total dividends (ex-distributions) and multiplying that number by the percentage of U.S. treasuries as indicated on the brokerage 1099 brochure or fund managers tax portion of their website? 

Also, say I was with Schwab for half the year accruing dividends and then changed to TD Ameritrade mid-way through the year. Would I still use the same U.S. treasury allocation percentage for each if that makes sense? (portion of the dividends paid under one account, then moved and the remainder paid on another account, showing for part of the year on one 1099-DIV and the remainder of the year on another 1099-DIV).

I know forms of this question have been asked but figured I would check with my nuances. I know for a national municipal bond fund if the percentage isn't over a certain amount to California for example, the State doesn't allow you to include say 5% as California muni bond income. Wasn't sure if the same applied for small amounts of U.S. treasury exposure in a mutual fund.

Thanks.

1 Best answer

Accepted Solutions
TomYoung
Level 13

How do you properly calculate U.S. government interest from the 1099-DIV?

"Is it as simple as going through each fund and looking at total dividends (ex-distributions) and multiplying that number by the percentage of U.S. treasuries as indicated on the brokerage 1099 brochure or fund managers tax portion of their website?"

"Yes" though California has special limitations:

"California does not tax dividends paid by a fund attributable to interest received from U.S. obligations or California state or municipal obligations IF at least 50% of the fund’s assets would be exempt from California tax when held by an individual"

"Would I still use the same U.S. treasury allocation percentage for each if that makes sense?"

I can't see any other way of doing this.  I don't know of any funds that break this information out on a distribution by distribution basis.

Tom Young




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3 Replies
TomYoung
Level 13

How do you properly calculate U.S. government interest from the 1099-DIV?

"Is it as simple as going through each fund and looking at total dividends (ex-distributions) and multiplying that number by the percentage of U.S. treasuries as indicated on the brokerage 1099 brochure or fund managers tax portion of their website?"

"Yes" though California has special limitations:

"California does not tax dividends paid by a fund attributable to interest received from U.S. obligations or California state or municipal obligations IF at least 50% of the fund’s assets would be exempt from California tax when held by an individual"

"Would I still use the same U.S. treasury allocation percentage for each if that makes sense?"

I can't see any other way of doing this.  I don't know of any funds that break this information out on a distribution by distribution basis.

Tom Young




gtax007
New Member

How do you properly calculate U.S. government interest from the 1099-DIV?

Got it. It's interesting because say I have a national municipal bond fund. Turbo tax will ask, "what portion of Firm A National Municipal Fund is from California municipal bonds?" If I put say 30% it will automatically then know it doesn't qualify to be exempt in full or in part from California taxes. However with the section on U.S. government bonds, it simply asks you to put in the total amount from all your funds that are from U.S. government interests. In other words, unless I knew that specific law I would put in the number and TurboTax never checks it or gives me the heads up in the same way?
TomYoung
Level 13

How do you properly calculate U.S. government interest from the 1099-DIV?

I've never had the opportunity to test this, personally, since I don't have any muni funds or any funds that have a heavy concentration of interest-bearing securities.  I could post this inconsistency over in the SU Lounge but TurboTax generally is very resistant to ANY changes in the federal program and I'd think they'd be even more reluctant to change any state tax programs.
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