How to report as tax-except the interest from VUSXX?

[LP1968]

Hi. I had a sizable amount from monthly interest from Vanguard Treasury Money Market Fund (VUSXX) which invests in U.S. Treasury securities. However, my 2019 1099-DIV did NOT report this amount as tax-except. instead, my bank suggested that I should do the exception myself! 

is this correct? if so, how best to it in TurboTax? 

[LP1968]

Hi. I am still looking for an answer to my question last week about: How to report as tax-except the interest from VUSXX?

my understanding is that Vanguard Treasury Money Market Fund (VUSXX) invests in U.S. Treasury securities, and therefore it's tax-except. However, my 2019 1099-DIV did NOT report this amount as tax-except. instead, my bank suggested that I should do the exception myself! 

How can i best to do this in TurboTax? 

[LP1968]

How can i best to do this in TurboTax? 

[JotikaT2]

How do you know you have interest income from U.S. obligations?  

For Federal purposes, this amount should already included in Box 3 of your Form 1099-INT.  

It includes interest from U.S Treasury Bills, Notes, and bonds and is taxable for federal purposes; but it may be tax exempt for purposes of your state return depending upon where it is sourced from.

I have attached a link with a bit more detail as to what type of income is taxable and not taxable as it does vary based upon your investment.

Interest income from US obligations

You would report this income in the federal section of the return.

1. Select Income & Expenses  
2. Scroll down to All income
3. Select Interest on 1099-INT
4. Select Add another 1099-INT
5. Proceed to enter your information.  You may need to check the box stating your form has other boxes.

[Ambilobe]

VUSXX is federally taxed and posted on my 1099-DIV

When the information is transferred to my NYS return, will it know that is not taxable? Or do I have to make that adjustment manually?

[MonikaK1]

Yes, TurboTax will automatically automatically identify the amount in Box 3 as an item to be subtracted from New York income, when you enter interest from U.S. Treasury securities in Box 3 of Form 1099-INT.

When you complete the New York state interview in TurboTax, you are asked a series of questions about any items that need to be treated differently or allocated among different states, and you will see the Box 3 amount listed as a subtraction from New York income. You don't have to do anything unless you need to allocate the subtraction amount among different states.

Typically, interest from corporate bonds will be in Box 1, interest from U.S. Treasuries will be in Box 3, and tax-exempt interest from muni bonds will be in Box 8. Even if you don't have to pay income tax on the interest, you still need to include it on your Federal tax return.

• Box 1 of the 1099-INT reports all taxable interest you receive, such as your earnings from a savings account.
• Box 2 reports interest penalties you were charged for withdrawing money from an account before the maturity date.
• Box 3 reports interest earned on U.S. savings bonds or Treasury notes, bills or bonds. Some of this may be tax-exempt.
• Box 4 reports any federal tax withheld on your interest income by the payer.
• Box 8 reports tax-exempt interest and relates to interest-bearing investments you hold with state and local governments, such as municipal bonds.

See this TurboTax tips article for more information.

[Ambilobe]

Etrade is listing in in box 1a of 1099-div.

Will that automatically make the adjustment?

[MonikaK1]

Dividends reported in Box 1a of Form 1099-DIV are total ordinary dividends. If part of your dividend distribution represented exempt-interest dividends, there would normally be an entry in Box 12. TurboTax will ask if you have entries in other than Boxes 1 and 2. If you check that box, additional entry fields will open up.

If you make an entry in Box 12, the next screen asks if a portion of the dividend includes US Government interest and other questions. Read the Learn More links after the questions to find out if they apply and check the correct boxes. The final screen asks you to identify the state or states the exempt-interest dividends came from. 

Please see this tax tips article for more information regarding the taxability of dividends.

[Ambilobe]

When you get to the NY tax return, it asks if any of the 1099-div interest is state tax free.

You have to go through your statements and make sure it is not state taxable. 

Ie..VUSXX is state tax free.

[whataboutzepa]

@MonikaK1 VUSXX used to be 100% exempted from state tax but couple of years ago, Vanguard changed the allocation and now it is around 80% exempted. Based on what you said, it should report about 80% of the dividends in 1099-DIV Box 12 that would be deducted from state tax, is that correct?

[SteamTrain]

@whataboutzepa 

No....box 12 on a 1099-DIV  is only for Municipal Bonds .....and those $$ can come from state/county/city bonds issued in states other than your own (except if you own a mutual Bond Fund that happens to be state-specific).

For US Govt Bond interest from a Mutual Fund (like VUSXX)

1)  In TTX, when US Govt bond interest is reported from a Mutual fund on a 1099-DIV form, those $$ are included in box 1a, along with other types of dividends from Funds, or even stocks, that you may own at that brokerage.   In order to break out the $$ that came from just the US Govt bonds (to be state tax-exempt), there is a page AFTER the main form entry, with a bunch of checkboxes.....the top one you must check "A portion of these dividends is U.S. Government interest"    Then on the next page, you enter the sub-amount that came from US Govt bonds.  BUT you need to calculate that sub-amount yourself from the data that the fund gives you at the end of the year (usually in late Jan to late Feb).

_________________

As a separate issue:

2)  IF, instead, you also own actual individual US Govt Bonds in your Brokerage account...then those interest $$ are reported in box 3 of a 1099-INT form....and just filling out that 1099-INT with the $$ properly showing in box 3, they will automatically be handled as being state-tax-exempt.

[VolvoGirl]

For state tax exempt dividends……

There should be extra pages with your 1099 from the broker or fund listing them.  Or you need to get the statements online from the company.  

Some brokers are not including the backup detail sheets and tables now and you have to go online to get them.  Like I have Vanguard and I'm in California.

For Vanguard......

You will need to calculate any amounts yourself using these tables.  Vanguard use to include these tables with the 1099 forms but now you have to get them online here.  There are 3.

Tax information for Vanguard funds | Vanguard

It can be hard to calculate.   I had to make a spreadsheet listing each fund, the dividend and percentage.