How do I enter TIPS and Treasury bonds in TurboTax?
If you were looking for an investment that could serve as a hedge against inflation, you may have purchased a Treasury Inflation-Protected Security (TIPS) from the US Department of the Treasury.
TIPS are US government bonds designed to protect against inflation. They work by adjusting their principal value each year based on the Consumer Price Index (CPI). TIPS also pay a fixed rate of interest semi-annually on this adjusted principal, which means your interest payments grow with inflation too. TIPS are issued with maturities of 5, 10, or 30 years.
When it’s time to complete your tax return using TurboTax, you’ll need to enter the information you received about your TIPS investment. It’s typically a statement that includes two tax forms in one.
Form 1099-OID (Original Issue Discount) to report the annual inflation-adjusted increase to the principal. For more information, see Where do I enter Form 1099-OID?
Form 1099-INT to report the semiannual interest payments. For more information, see Where do I enter Form 1099-INT?
The inflation adjustment is taxable as ordinary income in the year it occurs, even though you don’t receive it as a cash payment until the bond matures or is sold.
