Why doesn't adjusting dividends for US government interest change my tax?

rgf283 · ‎June 3, 2019

I have adjusted dividends earned from mutual funds by the amount of US government interest earned by those funds and it does not have any impact on my tax owed. I thought US government interest was federal tax free.

SteamTrain · ‎June 3, 2019

No....that amount might only affect your state taxes...not federal.
It's the states that do not tax Federal interest from US Bonds.

And even then it may depend on the size of the $$ adjustment amount (5% of $20 is only $1 of state tax saved)

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

View solution in original post

SteamTrain · ‎June 3, 2019

No....that amount might only affect your state taxes...not federal.
It's the states that do not tax Federal interest from US Bonds.

And even then it may depend on the size of the $$ adjustment amount (5% of $20 is only $1 of state tax saved)

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

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Why doesn't adjusting dividends for US government interest change my tax?