I have interest income from tax exempt bonds and ammortizationon my 1099. Why does turbo tax put the ammortization in itemized deductions rather than adjust the income

Answer

There can be times that an itemized deduction is appropriate.  Don't know if this actually applies to you or you just made a mistake.  Pub 550:

How To Report Amortization (Taxable Bonds)

Subtract the bond premium amortization from your interest income from these bonds.

Report the bond's interest on Schedule B (Form 1040A or 1040), line 1. Under your last entry on line 1, put a subtotal of all interest listed on line 1. Below this subtotal, enter the amortizable bond premium allocable to the interest payments for the year and label this amount "ABP Adjustment". Subtract this amount from the subtotal, and enter the result on line 2.

Bond premium amortization more than interest.

If the amount of your bond premium amortization for an accrual period is more than the qualified stated interest for the period, you can include the difference in Other Miscellaneous Deductions on Schedule A (Form 1040), line 28.

But your deduction is limited to the amount by which your total interest inclusions on the bond in prior accrual periods is more than your total bond premium deductions on the bond in prior periods. Any amount you cannot deduct because of this limit can be carried forward to the next accrual period.

Pre-1998 election to amortize bond premium.

Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988.

Bonds acquired before October 23, 1986.

The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit.

Bonds acquired after October 22, 1986, but before 1988.

The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you choose to treat it as an offset to interest income on the bond.



Tom Young

Was this answer helpful? Yes No
Default user avatars original
SuperUser
1 additional answer

No answers have been posted

More Actions

People come to TurboTax AnswerXchange for help and answers—we want to let them know that we're here to listen and share our knowledge. We do that with the style and format of our responses. Here are five guidelines:

  1. Keep it conversational. When answering questions, write like you speak. Imagine you're explaining something to a trusted friend, using simple, everyday language. Avoid jargon and technical terms when possible. When no other word will do, explain technical terms in plain English.
  2. Be clear and state the answer right up front. Ask yourself what specific information the person really needs and then provide it. Stick to the topic and avoid unnecessary details. Break information down into a numbered or bulleted list and highlight the most important details in bold.
  3. Be concise. Aim for no more than two short sentences in a paragraph, and try to keep paragraphs to two lines. A wall of text can look intimidating and many won't read it, so break it up. It's okay to link to other resources for more details, but avoid giving answers that contain little more than a link.
  4. Be a good listener. When people post very general questions, take a second to try to understand what they're really looking for. Then, provide a response that guides them to the best possible outcome.
  5. Be encouraging and positive. Look for ways to eliminate uncertainty by anticipating people's concerns. Make it apparent that we really like helping them achieve positive outcomes.

Select a file to attach:

Do you still have a question?

Ask your question to the community. Most questions get a response in about a day.

Post your question to the community
Default