Hi there, I live in CA and seemed to have earned tax-exempt dividend of around $2580 from Vanguard funds VWLUX, VMLUX, and VWIUX in 2021. Turbo Tax screen "Tax Exempt Interest and Dividends" in State taxes says : Tax exempt interest from California sources of $249 transferred from your federal return.Is any of this interest from funds with less than 50% of their assets invested in California and U.S. obligations?YesNo, all funds are 50% or more invested in California or U.S. Obligations.Vanguard Supplement info has these percentages for California for those funds:VWLUX (11.64%), VMLUX (4.5% - CA), and VWIUX (10.07%) Questions:1) I chose Yes for the above question, am I correct?2) Then TurboTax asks me "Enter less Than 50% Tax Exempt Interest"Please advise how to compute the above. For example: Should I enter $249 or the remaining which is $2330.82 out of $2580? Thank you so much!

Question

Tax Exempt interest and dividends question

Forum|Forum|4 years ago
March 16, 2022
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Hi there, I live in CA and seemed to have earned tax-exempt dividend of around $2580 from Vanguard funds VWLUX, VMLUX, and VWIUX in 2021. Turbo Tax screen "Tax Exempt Interest and Dividends" in State taxes says :

Tax exempt interest from California sources of $249 transferred from your federal return.

Is any of this interest from funds with less than 50% of their assets invested in California and U.S. obligations?

Yes
No, all funds are 50% or more invested in California or U.S. Obligations.

Vanguard Supplement info has these percentages for California for those funds:

VWLUX (11.64%), VMLUX (4.5% - CA), and VWIUX (10.07%)

Questions:

1) I chose Yes for the above question, am I correct?

2) Then TurboTax asks me "Enter less Than 50% Tax Exempt Interest"

Please advise how to compute the above. For example: Should I enter $249 or the remaining which is $2330.82 out of $2580?

Thank you so much!

B

Bsch4477

Employee

Choose “yes” since the funds had less than 50% invested in California obligations.

J

johnsantaclara1Author

Thank you so much Bsch4477

Once I choose yes, TurboTax asks me:

"Enter less Than 50$ Tax Exempt Interest"

Please advise how to compute the above.

Just FYI:

The only ones I had on my 2021 Vanguard tax form were VXUS, VWLUX, VWIUX, WMLUX and VTI. While filling Federal in the screen "Choose the state where your tax-exempt dividends came from",
I had chosen: "State: More Than One State" in the drop down.
I checked the box:"I earned tax exempt dividends in more than state."
In the screen "Which state are your $2590.01 of exempt interest-dividends from: For each fund:
I computed the Amount of Interest of dividends for "California", entered that under "Dollar Amount of Interests" for California. In the next row, I chose "More than One State" and entered the remaining.

I understand now that the sum of all the values I had entered for California = 249

Questions:
1. So should I not have checked the box ""Choose the state where your tax-exempt dividends came from" ?

2. What should I enter for "Enter Less Than 50% Tax Exempt Interest"?

Thank you.

Thanks a lot again!

R

RobertB4444

@johnsantaclara1 Any amount less than half of all of your tax exempt interest would qualify for the amount. $249 certainly qualifies for the "less than 50% from California".

1. You have to enter a state where the tax exempt interest originates. That is an IRS requirement. You did fine.

2. You already figured it - $249.

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