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Federal tax exempt interest which is taxable to the state

lbones
Level 4

I have client with federal tax exempt dividend interest from muni bonds derived from various states.  Where do I enter the amount that will not be taxable to the clients resident state.  Is it just a manual input to the resident state.  Example, they have $10,000 to tax exempt interest of which $2,000 is from their home state of NY.  Is there an area in which I put the $8000 on the federal dividend worksheet to flow to the state return or is it a manual input on the NY IT201. 

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Just-Lisa-Now-
Level 15
Level 15

If you double click on the dividend line of sch B, you dont see this on the page that opens?  Or is this not what youre looking for?


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

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16 Replies 16
Terry53029
Level 12
Level 12
when you are on the interest worksheet click f1 for help, go down to "bond interest for more than one state" and follow the well written instructions. They work very well
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lbones
Level 4
Thank you Terry.  Worked like a charm.  should have done that in the first place, would have saved myself a lot of aggravation.  
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Terry53029
Level 12
Level 12
you are welcome, glad to help
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Just-Lisa-Now-
Level 15
Level 15

If you double click on the dividend line of sch B, you dont see this on the page that opens?  Or is this not what youre looking for?


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

View solution in original post

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Just-Lisa-Now-
Level 15
Level 15
if you have multiple states, you may have to make multiple line entries on the Sch B itself

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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lbones
Level 4
When I double click on the dividend line I get the dividend income worksheet that you show.  From there I want to differentiate the taxable amount to the state versus the nontaxable part of the tax exempt interest when the fund is invested in various states.  I was hoping to do this without having to make multiple entries.  It seems instead I can just manually figure it out and make the entry on the state return.  Just thought there would be a quick, easy and non complicated way to do it on the federal worksheet.
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msmith7305
Level 5
Do as Just Lisa says. One line on B for NY allocation with amount of TE dividends on Line C1 ($12,833) of worksheet and NY as state on line C4 of worksheet. For balance ($2,535) of TE dividends do a separate entry on B, go to worksheet, put balance amount on Line C1 and use a different state on Line C4.
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lbones
Level 4
Thank you.  I did as you proposed and it works out just fine.  Several have come out to help with my questions.  Thanks to all.
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garman22
Level 12
Level 12

If I’m not mistaken, dbl click the line you’re working on on Sch B and it will take you to a worksheet where I believe there is a line item for that. If I’m wrong, sorry I’m not in office. 

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lbones
Level 4
There is a way to allocate interest income by state by double clicking the appropriate line but I do not see that dame option when I double click for dividend income on the dividend income worksheet.  I do not see a way to allocate by state.
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garman22
Level 12
Level 12
Are you looking to allocate multiple states? Could you accomplish that from the info worksheet under state allocations?
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lbones
Level 4
here is what I have.  Client has $12,833 of tax exempt dividend income.  Of that $12,833, 19.75% of that dividend income is derived from NYS.  So, $10,298 of the dividend income will be taxable to NYS.  I am trying to find a way to input that somewhere so it will flow to NYS or I could do a manual input to NYS.  I see where you can allocate on the interest income worksheet but not on the dividend income worksheet.
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garman22
Level 12
Level 12
Man, I’m sorry. I really thought there was a spot on the dividend worksheet to allow for exempt state dividends.
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lbones
Level 4
No problem, thanks for the help, I guess I can do a manual input on the NYS return for the taxable addition.
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poolcleaner
Level 8
Have you considered entering it incorrectly as tax exempt interest income as opposed to tax exempt dividend income? I suspect that IRS computer matching really won't care about the distinction.
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George4Tacks
Level 15

If the percentage is less than 50%, then I believe NY taxes the whole thing. Here are the instructions from the IT-201

Line 28 – Interest income on U.S. government bonds 

Did you include interest income from U.S. government bonds or other U.S. government obligations on lines 2, 6, or 11? If No, go to line 29. 

If Yes, enter the amount of interest income earned from bonds or other obligations of the U.S. government. Dividends you received from a regulated investment company (mutual fund) that invests in obligations of the U.S. government and meet the 50% asset requirement each quarter qualify for this subtraction. The portion of such dividends that may be subtracted is based upon the portion of taxable income received by the mutual fund that is derived from federal obligations. 

Contact the mutual fund for further information on meeting the 50% asset requirement and computing your allowable subtraction (if any). If you include an amount on line 28 from more than one line on Form IT-201, submit a schedule showing the breakdown from each line. Do not list the same interest more than once on lines 28 and 31; see the instructions for Form IT-225, subtraction modification numbers S-121 and S-123.


ex-AllStar
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