DC tax on interest from U.S. treasuries

Forum|Forum|1 year ago
March 1, 2025
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Block 3 on 1099 for an account in my wife's name included $XXX for interest from U.S. savings bonds and treasuries. This info entered automatically from download while doing federal return.

Filing DC return as married filing separately on same return. Came to screen showing that exact amount, and identified correctly as interest from U.S. bonds and obligations, and asking how to allocate it between us. The entire amount defaults to my wife (based on the earlier 1099 download), but the amount can be manually allocated, and allocating to me causes reduction in DC taxes. So two questions:

1. Given that this interest is exempt from state tax, why is the allocation causing the DC tax to change?

2. Even though the account is in my wife's name, am I permitted to allocate that interest to me?

DianeW777

It depends. The exempt interest may be used in a different part of the return that counts all income when determining certain credits and deductions might use it in calculations.

it seems you should allocate income to the spouse it belongs to unless the bonds were purchased in both names. See the instructions in the link and posted below:

2024 Instructions for D-40 (page 9)
Before completing Calculation J, and the Form D-40, you will need to figure the following for you and your spouse/registered domestic partner:
- • Each person's federal adjusted gross income;
- • Each person's additions to federal income;
- • Each person's subtractions from federal income; and
- • Each person's deductions.

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