Interest from U.S. savings bonds is subject to federal income tax but is not taxed by the state of New Jersey. Where can I see this on my state return?

Forum|Forum|11 months ago
April 11, 2025
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There were not any questions specifically about savings bonds as I went through the NJ section. Do I need to add them myself in adjustments? Does it belong in disposition of property where I can click omit? Or was that interest income automatically taken out as the system moved from federal to state?

Best answer by LenaH

Unlike other states, New Jersey does not begin with your federal adjusted gross income as a stating point of their calculation of state taxable income. Therefore, it is not shown as a deduction to income. Instead, the NJ-1040 lists out all of your income and the tax exempt income is shown on Line 16b. This amount is not taxed and the interest and dividend income worksheet attached to the return also shows the amount of tax-exempt interest income, under Interest Summary - Line 2.

In the mock return I completed to test the flow of data, I inputted a 1099-INT with $5,000 in Box 3. There was no additional information I had to input on any NJ screen. It automatically flowed to the correct lines.

NJ-1040

Interest & Dividend Worksheet

@april15comingsoo

baldietax

if it was reported on your Fed return at 1099-INT Box 3, that should be flowing thru to your state return as a subtraction from Federal income. Not sure what line that is on your NJ return but hopefully that points you in the right direction.

This line is usually a total of all subtractions from 1099-INT Box 3, 1099-DIV US Gov Obligations, 1099-OID etc but there is no drill down so if you have other Treasuries besides the savings bonds you'll need to understand the total subtraction expected and review your 1099s if it doesn't jive.

Note - if you have any accrued interest adjustment on the 1099-INT and more than one of Box 1/3/8 has income then this can cause issues as there is no way to tell TT which box the adjustment applies to and you need to split the 1099-INT.