Is Box 12 of 1099-DIV included in Turbotax question "A portion of these dividends is U.S.Government interest?"

[RChisholm]

The state of Virginia.  Many thanks..  Invesco High Yield Bond A, and American Tax=Exempt Bond A of America

[hbl3973]

Invesco High Yield Fund had no US government interest in 2023

Invesco High Yield Municipal Fund had 0.70% VI derived dividends in 2023

The American Tax-Exempt Fund of America had 0.0233% VI derived dividends in 2023

[lks333]

Thanks for your thoughtful response to this question. I have a supplemental page with my 1099-DIV that contains two columns, one delineating Direct Federal Income and the other Indirect Federal Income for four securities. Are both of these types of income considered nontaxable at the state level? I am in NY.

Thanks a bunch!
Lori K-S

[AmyC]

Probably tax free. Federal obligations and some federal agencies will be state exempt along with resident state and local obligations. For NY, you can find a list at TSB-M-95(4) - Tax.NY.gov - New York State. The last page lists US obligations and when they are taxable.

@lks333

[lks333]

Thanks, Amy. The holdings are within four mutual funds like DFA Global Sustainability Fixed Income. Do I need to search on each of these holdings to see where they invested the funds and use that information to look at the NYS listing you sent the link for? Or is there an easier way to figure this out? Or should I just assume that the Direct Federal Income and the Indirect federal Income are not taxable in NYS?

Thanks again!
Lori K-S

[AmyC]

There is no easy answer for you. Direct federal obligations I understand and agree - those are deductible. US bonds, T-bills, notes are all non-taxable to NY.

The indirect part  is my problem. If the fund is truly indirect funds, then it gets complicated. Some states allow indirect while others do not as a deduction.

New York Tax Treatment of Interest Income on Federal, State is a bit more complicated with  this statement: The subtraction modification applies only if the fund meets the 50% "U.S. Obligations" asset requirement under section 612(c) (1) of the Tax Law.

You can skip the indirect funds or you can research them to determine if they meet the requirements.

Reference: 

SEC regarding the above mentioned fund

Indirect general obligations. - Law.Cornell.Edu

[4434159022]

I live in Maryland and received interest from many, many states. Is any of this taxable and how do I enter it other than box 12?

[ThomasM125]

The interest you received from states other than Maryland is taxable on your Maryland tax return. After you enter your 1099-DIV form in TurboTax, you will be asked to enter the dividends by state:

[4434159022]

Thanks for answering, but I have almost ALL of the states. Do I have to calc and list the amounts for each? This seems especially tedious.

[AmyC]

MD will tax everything else so list the MD amount for exemption and then on the drop down, select the very last option, more than one state, enter the remainder of the exempt interest in that one box. No extra math to do!

@4434159022

[yz493]

This is very helpful. I live in North Carolina and the fund is Vanguard Federal Money Market Fund (VMFXX). Can you point me to the sheet or the tool to calculate the portion? THanks!

[AmyC]

No state taxes US government obligations. The box 12 amount will automatically be taken from your NC income. Do you have another situation?

See 2023 D-401 Individual Income Tax Instructions page 17 for exempt income.

You will also find details in your statements that came with your fund for additional taxes paid or exempt obligations.

@yz493 

[yz493]

Thank you! Unfortunately the box 12 on 1099-DIV is 0, so I have to calculate the number by myself, right? If the  dividend (box 1) is $100, and the fund has 60% of US Government obligations, then may I use a simple calculation of $100x60%=$60 as the amount of dividends that represent interest from US Government obligations.

[hbl3973]

yz493,

Yes, that is correct.  Multiply the total dividend by the fraction of US government interest.  There are two "quirks" to be aware of.  Some states only allow the deduction if at least 50% of the dividend is US government interest.  Your 60% does qualify.  Some states do not allow indirect federal government interest such as from

 1. Asian Development Bank
2. Federal Home Loan Mortgage Corporation
3. Federal National Mortgage Association
4. Government National Mortgage Association
5. Inter-American Development Bank
6. International Bank for Reconstruction and Redevelopment (World Bank)
7. Repurchase agreements
8. Federal Agency Bonds

and some others

Your broker's or mutual fund's supplemental tax information will often split out the indirect US government interest.  If not, just go with the percentage given.  I really doubt the IRS will waste endless time trying to dissect out a couple of indirect dollars.

[yz493]

This is super helpful. Thank you so much!