Entering Tax Exempt Interest Dividend for my state.

Forum|Forum|3 years ago
March 12, 2023
7 replies
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I have a mutual fund that has Exempt Interest Dividends shown in box 12 of a Form 1099-DIV.

I found that 2% of the Dividend is from my state. so I assume that means that only 2% of the total is tax exempt in my state.

All of the states show income and have a percentage of the income listed from their state. So I entered the remaining income (98%) as coming from 'More than one state'. Turbotax tells me that the two entries must equal the total tax exempt amount.

Did I do that correctly? I think that TurboTax assumes that 100% of the tax exempt dividend is from my state until I indicate that only 2% of it is.

Thank you

TurboTax Home & Biz Windows

Best answer by robtm

That is correct. The breakdown would be 2% from your state and 98% from More Than One State. For example if you had $100 total tax-exempt income, $2 would be allocated to your state and $98 to More Than One State for a total of $100.

robtmAnswer

Employee

Frank nKansasAuthor

Thank you. I appreciate your confirmation and example.

hbl3973

Employee

fpc,

Yes you almost surely did it correctly. But do check if your state allows even that 2% to be excluded from state taxation. One big exception is California where at least 50% of the tax exempt interest has to arise from CA bonds. In that case, you can just put it all as More Than One State. (A quick test shows that this CA determination is not automatically made by TurboTax for CA. Sigh.)

Frank nKansasAuthor

My state is Kansas and I know that TurboTax allowed the 2% allocation for whatever that's worth.

Thank you. I'll confirm that Kansas does indeed allow it.

hbl3973

Employee

fpc,

Kansas is OK. The Vanguard supplemental tax information footnotes at the bottom show only CA, MN, IL, IN having special rules.

rchead037

As noted in another comment, California exempts dividends and interests from funds only if they hold 50% Federal and California bonds.

The transfer of Federal information to the California return is VERY confusing. Dividends from a California tax exempt mutual fund carry over as "interest"; other Federal interest (Treasuries, government money market funds), come across as "interest" (I think... the California adjustment form shows an amount that I can't find anywhere on the Federal return, but is about what the purely Federal tax exempt interest would be.

I also got dividends from a tax-managed fund that is NOT 50% state-or-Federal, which was deducted under "dividends" even though the income was listed under "interest". Again, VERY confusing. I reversed these two manually, which TurboTax allowed without comment, but I'm not sure it's correct. We'll see.

TurboTax: When you transfer an amount from Federal to state return, it would be REALLY useful to have a way to link that amount back to the Federal return. Otherwise, I just have to speculate where the numbers come from 😞

FLJohnson

How did you determine that the figure was 2% for your state?

Frank nKansasAuthor

You look at a table of earnings for each mutual fund you have and the table will show you how much of the mutual funds' income comes from each state. For Kansas, I always find that percentage to be very low. I have found that each mutual fund has the table of their earnings online.

blondiesorganic

I have tax exempt income from almost every state listed by percentages on the 1099-div. How in the heck do I get the dollar amounts for each state without taking a lot of time figuring that out? I this a new requirement by the I RS and if so why don’t institutions put dollar amounts for these dividends? This is for 2024 tax return.

Woodguy53

If your brokers documentation added the state to the question: :which state is your $XXXX.00 of exempt interest dividends from" you need to "zero" out the state that was automatically input - and change the state to "select a state" in the answer to the first question. Otherwise when you enter the 2% for your state and the remaining to mulitple states - it will not calculate correctly

baldietax

for those going thru this, check for your state exemption on US territories also e.g. Puerto Rico, US Virgin Islands, Guam etc and enter those also rather than lump into the multiple state option. PR in particular is owned by some funds to juice yield and may be significantly higher % than your own state.