Treasury accrued interest paid limit

[HardRightEdge99]

Part 2:

I bought and then sold a treasury bond with both transactions in 2023 with no coupons paid to me.  If accrued interest paid at purchase was $1000 and accrued interest received at sale was $1,600, I presume I can apply the interest paid offset on the 2023 return with net taxable interest of $600 for this security even though no coupon was ever paid to me.

Right?  

[SteamTrain]

Point 2:  I guess, but never thought about that situation.....I've only bought stuff I hold.

[SteamTrain]

As to the year interest paid is concerned...I saw it several times over the years, but don't recall where now, adn I'm not particularly ready to go looking again.

Logically though, if you bought AND owned just ONE treasury bond in Nov/Dec 2023....that didn't pay you any interest until 2024...then you would have zero in box 3 of the 1099-INT, and attempting to declare that accrued interest in the 2023 year would be effective negative number for box 3.....that situation is what I imagine the IRS would be attempting to proactively eliminate.

[HardRightEdge99]

For the buy and sell in the same year with no coupon payments I'm doing the following unless somebody has a better idea:

Enter box 3. in TurboTax just as it is shown on the 1099-INT.  That's the accrued interest received from the sale.  Then I select "We need to adjust the taxable amount" from the uncommon situation screen.  Then I enter the adjustment amount for the accrued interest paid at time of purchase with "Other reasons" checked off.

This may not be the best way or the right way but that's what I'm doing in the absence of any other info.

[mike739-]

I opened a new brokerage account on 12/15/24 and bought a T-note on 12/20/24.

I paid  "accrued interest" of $3000 in the settlement of the purchase. 

The 1st coupon date for the T note isn't until May 2025, so my 2024 1099-INT has $0 interest in box 1 and box 3.   Turbo tax won't allow me to enter the $3000 taxable accrued interest paid as an adjustment (I assume because there was no reportable interest received  to offset it with).    I do have other interest income in other accounts at a different brokerage that I have entered  that could be offset.   Any idea what I am supposed to do to deduct the accrued interest I paid in Dec 2024?

[SteamTrain]

@mike739- 

You aren't allowed to declare that accrued interest you paid, on your tax return, until the year in which the bonds pay their first interest To-YOU.

Thus, you will indicate that accrued interest when you file your 2025 taxes next year instead.

Keep a spreadsheet, with notes as to which year to declare those accrued $$.

_____________________________

If you buy other bonds or investments from that brokerage, which, during 2025, produce $$ in boxes 8 (Muni's) or box 1 (Corporate or other interest). of the 1099-INT they issue next year, then you will need to break out the box 3 (and 12 if any $$ there) into it's own 1099-INT, before declaring the accrued interest you paid.  IF you don't, then the accrued interest you report for the treasuries, gets improperly divided proportionally among boxes 1, 3, and 8...because TTX can't know which bond types the accrued interest belongs to.

[jazzlover17]

One thing I ran into was a situation where I bought and sold a treasury before the first coupon payment. In this case I didn't need to worry about the accrued interest since there wasn't any coupon interest to deduct from. That may seem obvious to some people but it took me a while to realize that.