Accrued interest paid, tax-exept interest, & taxable interest

Forum|Forum|3 years ago
April 6, 2023
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I have taxable, tax-exempt, and accrued interest in 2022. Tax-exempt interest was entered in line 2a, 1040. The Accrued Interest paid was entered as an adjustment to the full amount of the taxable interest. It reduced the full amount of the taxable interest. However, the reduction is smaller than the accrued interest amount, although the taxable interest amount is far more than the accrued interest. The entering of accrued interest also reduced the amount of tax-exempt interest in line 2a, 1040. Can some one advise me why?

RobertB4444

Accrued interest is divided among total interest both taxable and non-taxable by the percentage of interest. The system is handling it properly.

@Phen

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PhenAuthor

Thank you for your response. By doing so, the system assumes that the total accrued interest included payment to both taxable and tax-exempted bonds. However, if it is the result of accrued interest paid to only taxable bonds (which is my case), shouldn't the full amount deductible? How does the Turbotax handle it in this case?

AliciaP1

All bonds have accrued interest so if you are reporting both taxable and tax-exempt interest then the accrued interest represents both types as well. There is no instance where the accrued interest would only represent taxable interest on a form that has both types of interest. As RobertB4444 posted, the system is handling it properly.

@Phen

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