TurboTax Desktop & State Tax Exempt Fund

[ItsMeTonyP]

Hello!  I am using TurboTax Desktop and attempting to enter the information for the state tax exempt fund TTTXX (BlackRock Treasury Trust Fund).  I was able to connect to Merrill Lynch and import my 1099-DIV, but this does not seem to have exemptions for the state.  For reference, I am filing in Illinois.  Any advice?  Thanks in advance!

[baldietax · Accepted solution]

I don't use import but not surprised that it can't do this calculation as often the supplemental tax info needed to make this calculation is not in the statement, I had to go to Blackrock to get the % for TFDXX (link below).

In the desktop you should be able to go in and update the 1099 that was created by the import, either thru EasyStep painful UI but scroll around to find and edit it, then after the main screen with all the 1099-DIV box details, click continue and you will get some interview questions including whether some of it was US Gov % and you can provide the $ figure.  Or, go into Forms mode and find the 1099-DIV and there is a space for the $ amount immediately under Box 1a.

You'll need this letter from Blackrock which gives you the % and multiply the amount of dividends from this fund to get the $ amount to enter

https://www.blackrock.com/cash/literature/shareholder-letters/blf-taxable-tax-exempt-tax-letter.pdf

Once this is input on the 1099-DIV you should see that flow thru to your state return as a subtraction to your taxable income.

[ItsMeTonyP]

Thank you very much for the reply BaldieTax!  If I understand this correctly, open up the 1099-DIV, locate the Security and the Subtotal that was paid for that, reference the Exempt Tax letter for the Income from Federal Obligations and multiply that percentage by the subtotal to get the amount exempt?

Example:  Security Subtotal = $1,000.00, Income from Federal Obligations = 94.19% (Thus 5.81% is taxable at the state level)

So, $1,000.00 * .9419 = $941.90 is exempt from State Tax and entered into the "U.S. government interest, if any, included in box 1a" field in the 1099-DIV.

BTW, you were correct - going into forms mode and finding the box on the 1099-DIV under 1a is much easier!

Is there a minimum percentage that the fund needs to be exempt for you to report this?

Thanks again!

[baldietax]

you got it, your example looks correct... as for the minimum state % I'm not familiar with anything specific to Illinois but CA, CT and NY are usually referenced for needing minimum 50% to qualify.  See these supplemental tax info letters from Fidelity and Vanguard which both talk about the calculation so you have something more official to refer to, and have the reference to specific requirements for those states.  Unfortunately Merrill doesn't do a nice letter like this as they don't own the funds...

https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/taxes/TY24GSESupplementalLetter.p...

https://investor.vanguard.com/content/dam/retail/publicsite/en/documents/taxes/USGO_012025.pdf

[ItsMeTonyP]

Thanks baldietax!  You were a great help!