Interest income exempt in NJ

Forum|Forum|4 years ago
April 25, 2021
2 replies
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My broker reported in 1099-INT taxable interest in Box 1 and US Treasury interest in Box 3. For Federal purposes, TurboTax adds them together. For NJ purposes, TurboTax is putting both amounts as Tax Exempt Interest. I think this is wrong. Only the Box 3 amount should be tax exempt. The Box 1 amount should be taxable. Does anyone else have this issue?

ThomasM125

After you enter your interest income in the federal section of TurboTax, you will have the option of saying your state does not tax the income as follows:

Once you check that box, your interest will show as tax exempt on the NJ form NJ-1040, line 16(b). The only problem is that it will exclude all of the interest. To correct that problem, you need to split the 1099-INT entry up into two entries, with one just reporting the income that is exempt in New Jersey.

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Lawrence VAuthor

Thomas - that is exactly what happened. I thought about doing what you suggested but won't IRS check that 1099 won't exactly match since split in two?

NJ is terrible tax state. They should follow the federal more closely. So annoying.

Thank you for your prompt reply.

fanfare

Employee

Don't blame New Jersey when TurboTax can't do it correctly.

Try a different tax software provider.

NJ follows the law by not taxing Treasury bond interest.

DaveF1006

According to NJ.gov, certain types of interest income are exempt from state tax. Specifically, interest and capital gains from obligations of the State of New Jersey or any of its political subdivisions, as well as from direct federal obligations like U.S. Savings Bonds and U.S. Treasury Bills, Bonds, and Notes, are not subject to New Jersey tax.

Is this the answer you are seeking?

@Mike001188

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