Tax-exempt interest in box 8 decreases refunds

[cjherf]

Why does entering tax-exempt interest in 1099-INT box 8 decrease my federal and state refunds?

[Vanessa A]

Are you getting the Earned Income Tax Credit?  If so, even though the interest is not taxable, it could change the calculations for the Earned Income Tax Credit.

The best way to determine what exactly is changing is to write down all the numbers or print your 1040 the way it is now and then delete the tax exempt interest to see which numbers change. Also, if you are on Social Security, it could be increasing the taxable amount of your social security.