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March 23, 2024
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Accrued interest paid to Treasury

  • March 23, 2024
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My brokerage account shows x amount accrued interest paid to the US Treasury under the supplemental tax statement and states that the information is not reported to the IRS but may be useful in preparing the tax return.  This interest relates to T Notes purchased in 2023.  Is this interest deductible?

    Best answer by SteamTrain

    Possibly....I say "possibly" because you can only subtract that accrued interest, that you paid to the seller...if the Note you purchased paid out an interest payment to YOU during 2023.  Certainly any Notes you purchase before July would Qualify, but for those purchased after June 30, you'd have to check to see if the note(s) purchased actually issued an interest payment in those last 6 months.    For those that didn't pay out interest to you in 2023, then you'd have to wait until 2024 taxes (filed in 2025) to subtract those accrued interest $$.

    __________________

    Procedure: now this is important...IF your 1099-INT form from the brokerage contains your US Treasury interest in box 3, but also any $$ in boxes 1 and/or 8 on the same form....then:

    1)   you need to remove all the box 3, and 12 $$ on that -INT form, and create a new 1099-INT with just the box 3 & 12 $$ on it.

    2)  As you step thru the new 1099-INT, On a page after the main page titled "Tell us if any of these uncommon situations apply", you need to check a box selection indicating "I need to adjust the taxable amount"

    3)...Then on the next page you enter the amount of accrued interest you paid for those Notes (subject to the limitations I noted above), and make the selection for "My accrued interest is included in this form 1099-INT".

     

    That will include a subtraction of those accrued interest $$ on the Schedule B

    ____________________________

    If you don't create a separate 1099-INT for the box 3&12 $$, and enter the accrued interest on a 1099-INT with any $$ in boxes 1 and/or 8....then the accrued interest you paid will (improperly) be proportionally applied to the box 1, 3 &8 $$ amounts.

    1 reply

    SteamTrain
    Employee
    March 23, 2024

    Possibly....I say "possibly" because you can only subtract that accrued interest, that you paid to the seller...if the Note you purchased paid out an interest payment to YOU during 2023.  Certainly any Notes you purchase before July would Qualify, but for those purchased after June 30, you'd have to check to see if the note(s) purchased actually issued an interest payment in those last 6 months.    For those that didn't pay out interest to you in 2023, then you'd have to wait until 2024 taxes (filed in 2025) to subtract those accrued interest $$.

    __________________

    Procedure: now this is important...IF your 1099-INT form from the brokerage contains your US Treasury interest in box 3, but also any $$ in boxes 1 and/or 8 on the same form....then:

    1)   you need to remove all the box 3, and 12 $$ on that -INT form, and create a new 1099-INT with just the box 3 & 12 $$ on it.

    2)  As you step thru the new 1099-INT, On a page after the main page titled "Tell us if any of these uncommon situations apply", you need to check a box selection indicating "I need to adjust the taxable amount"

    3)...Then on the next page you enter the amount of accrued interest you paid for those Notes (subject to the limitations I noted above), and make the selection for "My accrued interest is included in this form 1099-INT".

     

    That will include a subtraction of those accrued interest $$ on the Schedule B

    ____________________________

    If you don't create a separate 1099-INT for the box 3&12 $$, and enter the accrued interest on a 1099-INT with any $$ in boxes 1 and/or 8....then the accrued interest you paid will (improperly) be proportionally applied to the box 1, 3 &8 $$ amounts.

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