Confused on 1099-DIV if State of Mass taxes U.S interest on dividends

[sonzoil]

The following was from the info bubble on filing federal 1040,

Dividends from U.S. Government Bonds

The U.S. government taxes income you receive on its own bonds. Your state does NOT tax income from U.S. government bonds, but each state defines government bonds differently. You should check to see if any part of these dividends is taxable in your state. This information is usually included with the 1099 you received from your broker. You may also be able to get this information from your mutual fund company's website.

Based on this information, enter an adjustment for the amount your state does NOT tax, and the TurboTax State program will subtract this amount from your state income.

So with that said, on my 1099-DIV from fidelity, line 13,14,15 are blank. So I assume State of Massachusetts is NOT taxing me on US bond interest, so why am I suppose to determine if there is any amount that they would not tax me on and include that in the input screen?  (My 1099-INT from fidelity was completely blank, NO figures).

[fanfare]

US bonds don't pay dividends.  It is interest.

[sonzoil]

Could you be more clear in your response? The interview wants me to determine the amount that the state of Mass would not subject me to tax on.  This is from the interview concerning the 1099-DIV.  I just added that my 1099-INT was completely blank.

[SteamTrain]

On your 1099-DIV, a portion of box 1a $$ "might" be from US Govt Bonds that MA won't tax.

BUT

IF you are going to break out that amount , you must calculate that exact amount from whatever funds you held, and from the following Fidelity information  (BUT:  you don't have to, you can just let them be and move on):

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/taxes/2020-gse-letter-sai-funds.p...

___________________________________________

Once you determine that $ amount from US Govt bonds...you change nothing on the main 1099-DIV form, but on the page AFTER the main software form, you check a box "A portion of these dividends is US Government interest" .... then on the next page you'll have a place to enter that calculated amount, and then MA won't be taxing that sub-portion of dividends that was included in box 1a

[sonzoil]

Ok, I follow you, but have another question. On my 1099-DIV last page,there is a line showing a municipal money market fund that I own, and the tax exempt interest is shown. Then you can go to the fidelity site and find out the percentage that was Massachusetts holdings which amounted to 0.49% for that fund. Can I calculate that amount and put it into the interview screen, so it would be exempt from being taxed by Massachusetts?

[SamS1]

Depends.  Massachusetts doesn't tax interest income from obligations issued by  Massachusetts or any political subdivision (Cities and towns).  If the .49% represents these types of Massachusetts obligations, then that interest can be excluded from Massachusetts tax. 

[tomandjerry1]

According to the MASS gov website, 

https://www.mass.gov/info-details/mass-general-laws-c62-ss-2#(a)-

you can exclude the portion of dividends from a fund (RIC) that represent interest from EITHER Mass gov OR US  government obligations. ( Sec. 2(a)(2)(J), Ch. 62, G.L.). 

For the US gov case 2(A) says:  

"...  dividends received from a RIC ...  to the extent such dividends are attributable to interest on obligations of the United States exempt from state income taxation ...".  So, interest you receive from US gov obligations you hold are exempt (and show up in a numbered 1099 box), as well as  the portion of dividends from a fund that are from interest on US obligations.  Each fund that falls into this category will (should) provide (somewhere) the exact percentage of its dividend distribution that comes from state tax exempt sources.  Each fund company should provide a year end document of this.  For example, for Fidelity funds,  they supply this here

"2023 Percentage of Income from U.S. Government Securities"

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/TY23-GSE-Supplemental-Letter.pdf

Note the above table for the most part identified funds by their ticker with some exceptions (e.g. "Fidelity® Government Money Market Fund - All Classes* .. so SPAXX ) so if you don't find your funds symbol also search this table by fund name).

In addition a fraction of dividends could also be from obligations which are exempt from state tax too. When the fraction is state specific then there's no way to characterize this in one of the numbered 1099-DIV boxes.

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/taxes/2023-tei-by-year.pdf

Be sure to check all  your funds, not just money market type, since many stock funds include a portion of their holding in US obligations.   The fractions might not be large for generic funds, but ever little bit helps!

[tomandjerry1]

... an as a follow-up to the initial post/question in this thread 

"So I assume State of Massachusetts is NOT taxing me on US bond interest, so why am I suppose to determine if there is any amount that they would not tax me on and include that in the input screen? "

Yes, MA doesn't tax any US bond interest reported on a 1099-INT,  The TTax question here says:  "A portion of these dividends is U.S. Government interest", so we're dealing here with the 1099-DIV  that reports  total dividends distributed by the RIC of which some portion may be from US gov interest.

[tomandjerry1]

... And a bit more follow-up, …. Often Box 1a on your 1099-DIV is the sum of distributions from multiple funds you hold at this brokerage.  In this case you must (painstakingly!) pour thru subsequent sections of your consolidated 1099 to locate the details of each funds distribution, find that fund’s percentage (if any) and do the math.  TTax only wants the total amount.  Hey, nobody ever said being rich was easy, eh?