Where does one report tax-exempt income for out of state municipal bonds that must be taxed in one's home state?

[SteamTrain · Accepted solution]

It's all dealt with in the Federal section on 1099-INT and 1099-DIV forms:

1)  IF you hold a bunch of individual Bonds. Tax-exempt interest is usually reported on a 1099-INT form.  US bond interest in box 3 and State/municipal bonds in box 8.  Box 3 $$ are automatically excluded from State taxation, but are taxed on the Federal tax return. 

On the pages that follow the main form, there is a place where you MUST indicate whether the municipal bond interest ( box 8 ) came from "More than one state" ......Or... Only your resident state (rare.. unless you hold only individual bonds from your own state).......Or break it down to show bonds from your own state, the US territories, and all else as "More than one state"  (picture 1 below).

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2) IF you held mutual funds with Municipal bond holdings, those are reported on a 1099-DIV form. With all "non-municipal" dividends  in boxes 1a, 1b, and tax-exempt municipals in box 11  (new box this year..last year it was box 10). 

On the followup pages you again  indicate the Municipal bond breakdown for box 11 came from "More than one state" ..Or... Only your resident state (rare... unless you hold a state specific mutual fund)......OR.. break it down to show bonds from your own state, the US territories, and all else as "More than one state".  (looks the similar to picture 1 below), but a few states (CA and MN.) do not allow a breakdown unless the Mutual fund you owned contained more than 50% of it's holdings for that state for CA, or 95% MN-bonds for MN residents.  (...And IL doesn't allow a break-out at all for IL municipal bonds held in a mutual Fund) 

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extra:

3)  For a 1099-DIV, if some of the $$ in box 1a  came from US treasuries (and you want to have it not taxed by your state....then you have to calculate the actual $$ amount from the data the Mutual fund gives you at year-end. Then, on one of the pages that follows the main software form, you get a page (picture 2) where you check a box to indicate that some was US bond interest...and then the next page (picture 3) allows you to enter the $$ amount associated with that.

[RockiesCO]

Steam train,

I entered the municipal bond interest on the Federal 1040, “Interest and Dividends from Mutual Funds”.

Entered interest and dividends received in 2019 that are taxable in Colorado but we’re not subject to federal income tax.The number shows up in the state tax steps on the ”Interest and Dividends from Mutual Funds” page.

However, “Additions to Federal Taxable Income” indicates zero on  the actual state form. 

Any idea why the number is not migrating to the CO Form 104?

[SteamTrain]

@RockiesCO 

Nope...haven't a clue why.

IF you haven't got it worked out by now...

Call Customer Support and have them work thru it with you...they can launch an investigation...we user's cannot.  I'm not sure they are really open on weekends at this time...so you might have to wait until a weekday to call:

https://ttlc.intuit.com/community/using-turbotax/help/what-is-the-turbotax-phone-number/00/25632