1099-B Proceeds for US Treasuries to avoid NJ state tax

Forum|Forum|2 years ago
February 12, 2024
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One of the transactions on my 1099-B is for a US Treasuries redemption showing the dates acquired and redeemed, box 1d (proceeds), box 1e (cost, which is less than amount in 1d), and box 1f (accrued market interest, which equals 1d-1e). My understanding is that my state of NJ does not tax interest or gains on Treasuries, so do I need to do anything special when putting in this entry so that it is not taxed by NJ? My 1099-B also lists other stocks and bonds that would be taxed by NJ, so please let me know in case that also changes how I should put in the form so that only the US Treasury item is state exempt. Thanks!

TurboTax Premier Online

Best answer by fanfare

to exclude such gains and/or interest income from NJ

you have to

enter the 1099-B/1099-INT
file federal tax return only
delete the 1099-B/1099-INT
file the NJ State return

@jman3

mglauner

Treasury Bond interest accrues tax free. However, when you sell your bond (or bond fund), it is a fully taxable event.

Capital Gains realized from selling a bond are subject to federal and state taxes. The short-term or long-term capital gain, or loss, on a bond sale, is the difference between the selling price of the bond and the original purchase price of the bond.

Here's more details and Guide to Investment Bonds and Taxes.

jman3Author

Just to confirm, it seems according to NJ that "Gains or losses realized from the sale or exchange of exempt obligations such as United States Treasury bonds are not taxable, nor are capital gains distributions from a qualified investment fund attributable to exempt obligations."

It also appears on NJ's Tax Topic Bulletin GIT-5 that capital gains from also suggests that US Treasuries are exempt for interest and capital gains in NJ (https://www.nj.gov/treasury/taxation/pdf/pubs/tgi-ee/git5.pdf).

So if that's the case, how should I input my 1099-B items relating to US Treasuries based on my initial question? Thanks!

fanfareAnswer

Employee

to exclude such gains and/or interest income from NJ

you have to

enter the 1099-B/1099-INT
file federal tax return only
delete the 1099-B/1099-INT
file the NJ State return

@jman3

JKShaw

I have the same issue with my state return currently taxing the 1099-B gain from a US Treasury Bill. I talked with a TT analyst for quite a while and made him aware of the issue. In my State, a subtraction for interst from a US Obligation is entered in one box. But this is a gain, so enter under Other subtractions. In the State screen that asks If You Have Any Items Not Taxed by (your state), check the Other box and enter there. Checking the box for Federally taxable exempt obligations did nothing for me and I believe this is a TT glitch. I asked the agent to pursue.

bill12215

I have the same problem with Pennsylvania. Even though I reported my T-Bill income in Box 3, the state side is showing this as taxable and on top of that indicates I need to pay a penalty to Pennsylvania for underpayment. Can someone confirm that this is a bug in 2023 TurboTax? Is the only way to correct this is to manually remove the T-Bill income from the federal side and reprocess the state form? Thanks