US Treasury Interest reporting on Californa return

[encinogirl]

I have found that every year, I have to manually enter the US treasury interest on the California adjustment form.  Isn't there a place where ttax asks the question so that it is automatically entered on the CA adjustment form?

[RobertB4444]

Yes.  When you're walking through the California return there is a section labeled "Income California treats differently".  When you come to that section you should scroll down to 'Investments' and then click start next to 'Interest and DIvidend Adjustment'.  You can enter the US treasury interest there.

@encinogirl 

[bhingles]

I don't see a heading under "Other Interest and Dividend Adjustments" that seems appropriate for U.S. Treasury income.  The closest I see is "Interest on Obligations of D.C. Issued after 12/27/73.  But that does not sound correct.

[DaveF1006]

You do not need to make any entries. If this is correctly reported in your federal return, the amount will automatically populate to line 14 of your California 540 return and correctly adjust your Federal Adjusted Gross income.

@bhingles 

[bhingles]

DaveF1006, it wasn't picked up automatically.  I may have missed something in the step-by-step process.  I had to manually add it into the California Interest and Dividends Worksheet, line 15 A. 

Part of the problem may have been that this was income from a U.S. Treasury Money Market fund, and not from a T-Bill.  It was reported on 1099-DIV and not 1099-INT, so this was an adjustment to dividends and not interest income.  Sorry if my original post was misleading.

I can see where TurboTax could pull Treasury bond interest information from 1099-INT line 3, but there is no corresponding entry in 1099-DIV, so it looks like this has to be entered by the user.  If Step-by-step requested this information, it wasn't obvious to me.

[SteamTrain · Accepted solution]

When you entered your 1099-DIV form in the federal section, did you notice that on a page AFTER the main 1099-DIV for, there is a selection box for "A portion of these dividends is U.S. Government interst" ?  (Go back and edit that 1099-DIV form again.)

You select that box, and then on the next page you enter the $$ amount that YOU calculated came from US Govt bonds in your MM Fund.  (based on the % of the distribution from that fund that the fund publishes...it isn't always 100% in spite of the name of the fund),  That should automatically include those $$ amounts as being CA -exempt on the CA forms.  The total $$ in box 1a of the form 1099-DIV can come from various sources, so you have to use your supplemental sheets to determine that exact amount.

________

But be careful...for CA you can only include those $$ if the Mutual fund/MM Fund holds at least 50% of its assets in US Govt bonds/Notes etc.  (at least that's the % I recall).   Not greater than 50% of its distribution $$. 

For instance, the Fidelity listing of Mutual/MM Funds with US Govt interest distributions, it lists at least one fund where more than 50% of its $$ distributed came from US Govt bonds...but they do not indicate that CA residents can exclude that interest because that particular fund did not have more than half its assets in US Bonds.

@bhingles 

[bhingles]

@SteamTrain

Thanks, I see it now.  I guess I just missed it, probably wasn't thinking about state taxes at the time.

That was good information about the asset percentage threshold vs income percentage.  I did not know that one is needed to determine eligibility, and the other is for calculating exempt income (if eligible).  I hope I can remember it all next year.