NJ treasury market discount is not tax exempted by TT

Forum|Forum|2 years ago
March 10, 2024
1 reply
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Hi, I am using TT online premier version. There are 2 issues I am noticing in my NJ interest calculations:

1. When I select that some of the interest income is not taxable in NJ in the federal form, TT is treating all interest income in that 1099-INT as not taxable for NJ.

2. The treasury bond market discount is treated as taxable for NJ. From all my reading it appears that this should be treated as interest income and therefore tax exempt for NJ.

How can I adjust these two for NJ return. Can I update (or override) the NJ worksheets? Or is there a workaround - only for the NJ return?

TurboTax Premier Online

VolvoGirl

Employee

How are you entering the interest on the federal side? To not be taxed in state you need to enter it in box 3 not box 1. You have to check the little box under box 1 that says my form has more boxes for it to open up. Then Turbo Tax automatically subtracts it from the AGI on the state tax return. If you are entering it from box 3 then also select some interest is not taxable in the state you will be doubling it.

ma6878Author

@VolvoGirl - Your reply addresses my point #1. But the point #2 in my post is still an issue. The market discount from treasuries is from the 1099-B and so there is no way to indicate tax exempt in the federal screens. They are taxable at federal level but not at NJ because they are treated as treasry bond interest. How can I exclude those in the NJ return?

One workaround I have is I can offset market discount amount in any one of the 1099-INT I have in the federal flow by putting that amount in box 3 and subtracting it from box 1. This should not impact the federal taxes but will exclude the market discount from NJ return. Not sure if that would cause problems though with the IRS.