Question on State for Vanguard Stocks

[johnsantaclara1]

I live in California State and own Vanguard stock such as  VWLUX, VWIUX and VMLUX, for which I see tax-exempt dividends in my Vanguard tax form. Turbo Tax asks me the following question when I import Vanguard tax form. Please confirm if I should enter California (where I live) as the state and if not, where should I get the state for those tax-exempt dividends?

Question from Turbotax:

Choose the state where your tax-exempt dividends came from

This is for the dividends of <> from Vanguard Marketing corporation vanguard brokerage.

[JulieS · Accepted solution]

When you get to the question, Choose the state where your tax-exempt dividends came from, you should choose More than one state, which is at the bottom of the drop down. 

The Vanguard Funds you list here are multi-state municipal bond funds. They are exempt from federal tax, but only the amount that is from your home state, California, is exempt from state tax. 

If this is a large amount of exempt dividends, you may want to figure out how much is from California. If you want to list the amount for California, check the box that says I earned tax-exempt dividends from more than one state. 

When you get your tax forms, you should also have an enclosure sheet that lists the percentage of tax exempt dividend from each state. 

Say your total exempt dividend is $1,000. You check the enclosure and it says that 5.8% is from California. $1000 X .058 = $58 from CA.

In this case, you would select CA and enter $58. On the next line enter More than one state and enter $942 (the rest of the $1000 total).

[johnsantaclara1]

Hi JulieS, Thanks again! I chose "I earned tax exempt dividends in more than one state" and am calculating for each of my funds for CA like you advised.

  One quick question: For the "State" drop down on the top, Should I still choose "More than One State"  or "California"?

Thanks again!

[ErnieS0]

Split your tax exempt dividends between California and Multiple States. 

California does not tax dividends received from 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. So you'll need a CA amount and multiple states for it to total out.

Your funds may also have US government interest. To enter that amount, select the box A portion of these dividends is US government interest on the screen Tell us if any of these uncommon situations apply to you.

2020 Supplemental Guidelines to California Adjustments

[johnsantaclara1]

Thank you. My question to JulieS was about 1) whether to choose California or More than one state in the dropdown at the top before entering the amounts below the check box as shown in this picture. 2) If the way I have entered (as an example) in the 2nd screen shot below is the right way. Thank you.

[RobertB4444]

As @JulieS says above-

Click 'more than one state'

Type 'California' in box one

Put California's percentage in the amount box

Type 'More than one state' in box 2

Put the rest of the dividends in the amount box.

[johnsantaclara1]

Hi JulieS and RobertB4444, Thanks again for your kind advice.

I entered the values in Federal as per your suggestion which came to total of $249 for California and  $2330.82 for "More than One State" out of $2580 . Now State return is asking me the following questions:

Turbo Tax screen "Tax Exempt Interest and Dividends" in State taxes says:

Tax exempt interest from California sources of $249 transferred from your federal return.

Is any of this interest from funds with less than 50% of their assets invested in California and U.S. obligations?

• Yes
• No, all funds are 50% or more invested in California or U.S. Obligations.

Vanguard Supplement info has these percentages for California for those funds:

VWLUX  (11.64%), VMLUX (4.5% - CA), and VWIUX (10.07%)

Questions:

1) I chose Yes for the above question, am I correct?

2) If I chose Yes, TurboTax asks me "Enter less Than 50% Tax Exempt Interest"

Please advise how to compute the above. For example: Should I enter $249 or the remaining which is $2330.82 out of $2580 or something else?

(Just FYI: I live in CA and seemed to have earned tax-exempt dividend of around $2580 from Vanguard funds VWLUX, VMLUX, and VWIUX  in 2021. )

Thank you so much!

[JulieS]

Assuming the information from Vanguard is correct, you can answer No, to that question.