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Where do I indicate that interest income from U.S. Government agency bonds from FFCB & FHLB is state exempt?

Interest income from U.S. Government agency bonds issued by Federal Farm Credit Banks, Federal Home Loan Banks and TVA is exempt from state tax. How do I indicate this on Federal or New York forms?


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Where do I indicate that interest income from U.S. Government agency bonds from FFCB & FHLB is state exempt?

IF  ...if such interest is reported in box 3 of a 1099-INT form.....then you enter that 1099-INT in the Federal section, and anything in box 3 of a 1099-INT will automatically be dealt with by the software on the state tax return.....i.e. removed as taxable income for the state.  

But you need to report exactly as shown on the tax forms you received.....see further notes below, about situations where it's been reported  in box 1 of a 1099-INT, or box 1a of a 1099-DIV

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

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5 Replies

Where do I indicate that interest income from U.S. Government agency bonds from FFCB & FHLB is state exempt?

IF  ...if such interest is reported in box 3 of a 1099-INT form.....then you enter that 1099-INT in the Federal section, and anything in box 3 of a 1099-INT will automatically be dealt with by the software on the state tax return.....i.e. removed as taxable income for the state.  

But you need to report exactly as shown on the tax forms you received.....see further notes below, about situations where it's been reported  in box 1 of a 1099-INT, or box 1a of a 1099-DIV

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

Where do I indicate that interest income from U.S. Government agency bonds from FFCB & FHLB is state exempt?

…..(fixed a typo above)
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

Where do I indicate that interest income from U.S. Government agency bonds from FFCB & FHLB is state exempt?

( NY has a Mutual Fund 50% of assets holding limit for this type of reporting on a 1099-DIV)

#2)   IF the bonds were held within an actual Mutual Fund collection of bonds, and not individual bonds you own directly, then they may issue a 1099-DIV for those $$ instead.....but the 1099-DIV entries may include both state-taxable, and state-non-taxable interest.  In that case you just enter all the boxes the 1099-DIV as received form the Mutual Fund company, but on a follow-up page there is a series of checkboxes....one of which says "A portion of these dividends is US Government interest".  You check that box and on the next page you enter the exact $$ amount that is from those US govt bonds......you have to calculate the exact amount yourself form the Broker's supplemental information they provide.

Additional info about 1099-INT and 1099-DIV form reporting below and whether you are allowed to deduct from NY income when reported on a 1099-DIV.

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

Where do I indicate that interest income from U.S. Government agency bonds from FFCB & FHLB is state exempt?

Interesting though, I notice my TVA bond interest is reported in box 1 of my Fidelity 1099-INT, even though it is supposed to be included to also be considered a US Govt Bond by my state (NC) .  NY does too .

 IF that is your situation (it's in box 1 of a 1099-INT), then you'd have to handle it in the NY interview portion.  In my NC software, there is a place during the interview that I can tell indicate in the software that I have other "Deductions from North Carolina Income"  and I can place it there and describe what bonds are involved.  

But this would only be in a situation where you hold the individual  FFCB & FHLB & TVA bonds, and their bond interest is reported in box 1 of a 1099-INT.  Check your broker's supplemental information to see what box they report this interest in...

 (now I have to review myself whether it is worthwhile to amend my old NC tax returns for the last 3 years....and I'm puzzled why the TVA interest is not in box 3 of the 1099-INT...that could be an IRS requirement of some kind, for some reason, not yet discovered)
____________________________
Other....1099-DIV situation for NY:
...,....from my recent reading about NY, they seem to have a 50% asset limit for taking a NY deduction for US Govt interest from Bond Funds.  i.e, if you have US Govt/TVA/FFCB & FHLB that is reported on a 1099-DIV form, that comes from Mutual fund holdings, then the Mutual Fund the holds the bonds must have at least 50% of it's assets in those US Govt/TVA/FFCB & FHLB holdings...otherwise, you cannot take the NY deduction for those US Govt/TVA/FFCB & FHLB bond dividends.   that 50% of assets limit does not apply to NY-issued holdings.

See the second entry on page 3 of:

(Reference gone..no longer valid)

____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*

Where do I indicate that interest income from U.S. Government agency bonds from FFCB & FHLB is state exempt?

It does not show the state of Minnesota as being one of them???

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