Help with my 2022 taxes -- how to handle munis in 1099 DIV?

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Aguilar
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Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by Aguilar »

I have equity funds, a NY muni, and a natl limited term exempt muni in my brokerage.

When filing 1099-DIV, FreeTaxUSA asks "Is this a mutual fund that has U.S. Government interest income?" I answered NO.

In the next screen it says:

You entered tax-exempt dividends of $1,249 in Box 12 of your Form 1099-DIV.

Is any of your $1,249 of tax-exempt dividends from a bond issued by the state you lived in (or by a municipality located in your state)?

I put YES since I have VNYTX Vanguard New York Long-Term Tax-Exempt Fund Investor Shares - is this correct? While it's not a bond, it's a fund of muni bonds issued by NY state

Then it says Enter the amount of your $1,249 of tax-exempt dividends that was from bonds issued by your state (or a municipality in your state):
I entered 761, which is the total dividends from VNYTX I received in 2022. is this correct?
rkhusky
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by rkhusky »

Seems correct.

The national fund will also have NY bonds. Vanguard has a document/page that shows the percentage for each state.

Edit: If you use the national fund, see if NY requires minimum percentage in NY bonds for deductibility.
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by sycamore »

rkhusky wrote: Mon Mar 20, 2023 9:18 am ...
The national fund will also have NY bonds. Vanguard has a document/page that shows the percentage for each state.
And sometimes the state by state breakdown is included in the 1099 document. OP, look in your consolidated 1099, probably somewhere toward the end.
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by retired@50 »

Aguilar wrote: Mon Mar 20, 2023 8:48 am I have equity funds, a NY muni, and a natl limited term exempt muni in my brokerage.
According to this document (linked below) at Vanguard, 14.04% of the Limited Term Tax Exempt fund tax-exempt interest is from NY bonds.

https://www.vanguard.com/pdf/INBST_2023.pdf

So, you may want to adjust the amount of tax-exempt interest related to NY.

Regards,
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CAsage
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by CAsage »

Same problem, different coast! If you have a New York Muni fund, it's 100% tax exempt in both federal and state tax returns (Amount A). If you have a "national" muni fund, only the portion paid by NY bonds is tax exempt (fraction of Amount B). So you have to wade through the details of the brokerage account, and then exclude all of Amount A plus (Amount B times NY-%). There's always a table listing this for each fund, or maybe in your 1099.
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Aguilar
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by Aguilar »

CAsage wrote: Mon Mar 20, 2023 6:03 pm Same problem, different coast! If you have a New York Muni fund, it's 100% tax exempt in both federal and state tax returns (Amount A). If you have a "national" muni fund, only the portion paid by NY bonds is tax exempt (fraction of Amount B). So you have to wade through the details of the brokerage account, and then exclude all of Amount A plus (Amount B times NY-%). There's always a table listing this for each fund, or maybe in your 1099.
Just saw your reply. Not sure what you mean by NY-%.

Did I do this correctly?

(sum of NY munis exempt dividends) + [(sum of natl limited term exempt dividends) x 14.04%]

My cal is $860

Also, are dividends from the non-NY portion of vanguard national limited term tax exempt taxable at the state level?
Last edited by Aguilar on Sun Apr 16, 2023 10:56 am, edited 1 time in total.
jebmke
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by jebmke »

CAsage wrote: Mon Mar 20, 2023 6:03 pm Same problem, different coast! If you have a New York Muni fund, it's 100% tax exempt in both federal and state tax returns (Amount A). If you have a "national" muni fund, only the portion paid by NY bonds is tax exempt (fraction of Amount B). So you have to wade through the details of the brokerage account, and then exclude all of Amount A plus (Amount B times NY-%). There's always a table listing this for each fund, or maybe in your 1099.
Some states also allow you to exclude income from bonds of US Possessions like USVI and Guam - I know MD does. Those might be a separate line.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Aguilar
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by Aguilar »

jebmke wrote: Sun Apr 16, 2023 10:12 am
CAsage wrote: Mon Mar 20, 2023 6:03 pm Same problem, different coast! If you have a New York Muni fund, it's 100% tax exempt in both federal and state tax returns (Amount A). If you have a "national" muni fund, only the portion paid by NY bonds is tax exempt (fraction of Amount B). So you have to wade through the details of the brokerage account, and then exclude all of Amount A plus (Amount B times NY-%). There's always a table listing this for each fund, or maybe in your 1099.
Some states also allow you to exclude income from bonds of US Possessions like USVI and Guam - I know MD does. Those might be a separate line.
Did you see my question above? Any help?
exodusing
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by exodusing »

The NY fund is 100% exempt from NY tax.

A portion of the national fund is exempt from NY tax. That portion is the percent attributable to NY and the US possessions listed at the bottom of https://www.vanguard.com/pdf/INBST_2023.pdf The remainder is taxable by NY.
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by CAsage »

"NY-%" was intended to mean "the percentage of that fund's earnings from NY munis". Your calculation looks right. The non-NY municipal bond earnings percentage will not be tax-free in NY; states tend to exclude only their own Municipal bonds and tax those from other states. Agree it's messy, I try to just stick with CA only bonds but had one brief month in a national fund.... to my arithmetic regret.
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Aguilar
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by Aguilar »

exodusing wrote: Sun Apr 16, 2023 11:04 am The NY fund is 100% exempt from NY tax.

A portion of the national fund is exempt from NY tax. That portion is the percent attributable to NY and the US possessions listed at the bottom of https://www.vanguard.com/pdf/INBST_2023.pdf The remainder is taxable by NY.
Are you saying I should include the percentages listed under the US territories? That portion of the limited term tax exempt fund isn’t subject to NY tax? That would be 15.99%: NY plus US territories.

(sum of NY munis exempt dividends) + [(sum of natl limited term exempt dividends) x 15.99%]
exodusing
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by exodusing »

Aguilar wrote: Sun Apr 16, 2023 1:11 pm
exodusing wrote: Sun Apr 16, 2023 11:04 am The NY fund is 100% exempt from NY tax.

A portion of the national fund is exempt from NY tax. That portion is the percent attributable to NY and the US possessions listed at the bottom of https://www.vanguard.com/pdf/INBST_2023.pdf The remainder is taxable by NY.
Are you saying I should include the percentages listed under the US territories? That portion of the limited term tax exempt fund isn’t subject to NY tax? That would be 15.99%: NY plus US territories.

(sum of NY munis exempt dividends) + [(sum of natl limited term exempt dividends) x 15.99%]
Yes. If you have $100 of income from the Ltd Term TE fund then 14.04+0.20+1.72+0.03 is exempt from NY tax and the balance is subject to NY tax. If you have $100 of income from a NY muni fund or individual bond, then $100 is exempt from NY tax.
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by FactualFran »

exodusing wrote: Sun Apr 16, 2023 2:21 pm
Aguilar wrote: Sun Apr 16, 2023 1:11 pm Are you saying I should include the percentages listed under the US territories? That portion of the limited term tax exempt fund isn’t subject to NY tax? That would be 15.99%: NY plus US territories.

(sum of NY munis exempt dividends) + [(sum of natl limited term exempt dividends) x 15.99%]
Yes. If you have $100 of income from the Ltd Term TE fund then 14.04+0.20+1.72+0.03 is exempt from NY tax and the balance is subject to NY tax. If you have $100 of income from a NY muni fund or individual bond, then $100 is exempt from NY tax.
Doing that would exclude twice from State income the amount of tax-exempt income from outside the United States.

According to the instructions for Federal income tax returns:
Also include on line 2a [tax-exempt interest] any exempt-interest dividends from a mutual fund or other regulated investment company. This amount should be shown in box 12 [exempt-interest dividends] of Form 1099-DIV.
A 1099-DIV that I have for a Vanguard Tax-Exempt bond fund has in box 12 an amount that is equal to the sum of the monthly income distributions. Vanguard indicates that the fund had a non-zero percentage of tax-exempt dividends from outside the United States. Using the exempt-interest dividends amount as-is on a Federal income tax return means that the tax-exempt dividends from outside the United States are excluded from Federal Adjusted Gross (AGI).

NY income tax returns start with the Federal AGI and make adjustments to it. One adjustment is adding to the Federal AGI interest/dividend income that was excluded from it but is to be included in the State AGI. By excluding from the additions to Federal AGI the dividends from outside the United States, that amount is being excluded twice from the State AGI: once from the Federal AGI and once from the State additions to the Federal AGI.
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by exodusing »

FactualFran wrote: Sun Apr 16, 2023 3:32 pm
exodusing wrote: Sun Apr 16, 2023 2:21 pm
Aguilar wrote: Sun Apr 16, 2023 1:11 pm Are you saying I should include the percentages listed under the US territories? That portion of the limited term tax exempt fund isn’t subject to NY tax? That would be 15.99%: NY plus US territories.

(sum of NY munis exempt dividends) + [(sum of natl limited term exempt dividends) x 15.99%]
Yes. If you have $100 of income from the Ltd Term TE fund then 14.04+0.20+1.72+0.03 is exempt from NY tax and the balance is subject to NY tax. If you have $100 of income from a NY muni fund or individual bond, then $100 is exempt from NY tax.
Doing that would exclude twice from State income the amount of tax-exempt income from outside the United States.

According to the instructions for Federal income tax returns:
Also include on line 2a [tax-exempt interest] any exempt-interest dividends from a mutual fund or other regulated investment company. This amount should be shown in box 12 [exempt-interest dividends] of Form 1099-DIV.
A 1099-DIV that I have for a Vanguard Tax-Exempt bond fund has in box 12 an amount that is equal to the sum of the monthly income distributions. Vanguard indicates that the fund had a non-zero percentage of tax-exempt dividends from outside the United States. Using the exempt-interest dividends amount as-is on a Federal income tax return means that the tax-exempt dividends from outside the United States are excluded from Federal Adjusted Gross (AGI).

NY income tax returns start with the Federal AGI and make adjustments to it. One adjustment is adding to the Federal AGI interest/dividend income that was excluded from it but is to be included in the State AGI. By excluding from the additions to Federal AGI the dividends from outside the United States, that amount is being excluded twice from the State AGI: once from the Federal AGI and once from the State additions to the Federal AGI.
Are you disagreeing with the statement that income from muni bonds issued by NY and by the US territories is exempt from taxation in NY?

Muni income is exempt from federal taxation. For NY, you add back muni income from jurisdictions that are not exempt from NY taxation.

FWIW, TurboTax asks you to list muni income by jurisdiction (including a general "more than one state"). Attributing income from a national muni fund to, e.g., Guam, affects NY tax the same as attributing income to NY.
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by FactualFran »

exodusing wrote: Sun Apr 16, 2023 6:07 pm Are you disagreeing with the statement that income from muni bonds issued by NY and by the US territories is exempt from taxation in NY?

Muni income is exempt from federal taxation. For NY, you add back muni income from jurisdictions that are not exempt from NY taxation.

FWIW, TurboTax asks you to list muni income by jurisdiction (including a general "more than one state"). Attributing income from a national muni fund to, e.g., Guam, affects NY tax the same as attributing income to NY.
What I wrote was not disagreeing with the statement that income from muni bonds issued by NY and by the US territories is exempt from taxation in NY I wrote: "Doing that would exclude twice from State income the amount of tax-exempt income from outside the United States." My statement could be wrong. It would be helpful to have a reference to Federal and State laws or regulations specifically about whether interest income Vanguard attributes as "Outside the United States" with municipal bond funds is included in Federal and State income.
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by exodusing »

FactualFran wrote: Sun Apr 16, 2023 8:26 pm
exodusing wrote: Sun Apr 16, 2023 6:07 pm Are you disagreeing with the statement that income from muni bonds issued by NY and by the US territories is exempt from taxation in NY?

Muni income is exempt from federal taxation. For NY, you add back muni income from jurisdictions that are not exempt from NY taxation.

FWIW, TurboTax asks you to list muni income by jurisdiction (including a general "more than one state"). Attributing income from a national muni fund to, e.g., Guam, affects NY tax the same as attributing income to NY.
What I wrote was not disagreeing with the statement that income from muni bonds issued by NY and by the US territories is exempt from taxation in NY I wrote: "Doing that would exclude twice from State income the amount of tax-exempt income from outside the United States." My statement could be wrong. It would be helpful to have a reference to Federal and State laws or regulations specifically about whether interest income Vanguard attributes as "Outside the United States" with municipal bond funds is included in Federal and State income.
Are US territories considered outside the US for these purposes?

Income from the US territories is included in the reported dividends from Vanguard's national muni fund (as set forth on the linked Vanguard document listing sources). Adding back the total dividends, other than NY and US territories income, would not seem to result in double counting.

Turbotax is hardly a definitive source of tax law or regulation, but it has treated income from US territory munis the same as income from NY munis for the many years I've been using it. I would think someone would notice if the treatment was wrong, but one never knows.

I wonder if I'm missing something.
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by jebmke »

exodusing wrote: Mon Apr 17, 2023 9:31 am
FactualFran wrote: Sun Apr 16, 2023 8:26 pm
exodusing wrote: Sun Apr 16, 2023 6:07 pm Are you disagreeing with the statement that income from muni bonds issued by NY and by the US territories is exempt from taxation in NY?

Muni income is exempt from federal taxation. For NY, you add back muni income from jurisdictions that are not exempt from NY taxation.

FWIW, TurboTax asks you to list muni income by jurisdiction (including a general "more than one state"). Attributing income from a national muni fund to, e.g., Guam, affects NY tax the same as attributing income to NY.
What I wrote was not disagreeing with the statement that income from muni bonds issued by NY and by the US territories is exempt from taxation in NY I wrote: "Doing that would exclude twice from State income the amount of tax-exempt income from outside the United States." My statement could be wrong. It would be helpful to have a reference to Federal and State laws or regulations specifically about whether interest income Vanguard attributes as "Outside the United States" with municipal bond funds is included in Federal and State income.
Are US territories considered outside the US for these purposes?

Income from the US territories is included in the reported dividends from Vanguard's national muni fund (as set forth on the linked Vanguard document listing sources). Adding back the total dividends, other than NY and US territories income, would not seem to result in double counting.

Turbotax is hardly a definitive source of tax law or regulation, but it has treated income from US territory munis the same as income from NY munis for the many years I've been using it. I would think someone would notice if the treatment was wrong, but one never knows.

I wonder if I'm missing something.
I've never seen tax software where the software "treated income" - it has always been my experience that the user has to tell it which income might have to be added or subtracted when preparing a state return.

With respect to the Federal return, the 1040 instructions state that the income reported in Box 12 on the Div goes on line 2a of 1040.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by exodusing »

jebmke wrote: Mon Apr 17, 2023 9:38 am
exodusing wrote: Mon Apr 17, 2023 9:31 am
FactualFran wrote: Sun Apr 16, 2023 8:26 pm
exodusing wrote: Sun Apr 16, 2023 6:07 pm Are you disagreeing with the statement that income from muni bonds issued by NY and by the US territories is exempt from taxation in NY?

Muni income is exempt from federal taxation. For NY, you add back muni income from jurisdictions that are not exempt from NY taxation.

FWIW, TurboTax asks you to list muni income by jurisdiction (including a general "more than one state"). Attributing income from a national muni fund to, e.g., Guam, affects NY tax the same as attributing income to NY.
What I wrote was not disagreeing with the statement that income from muni bonds issued by NY and by the US territories is exempt from taxation in NY I wrote: "Doing that would exclude twice from State income the amount of tax-exempt income from outside the United States." My statement could be wrong. It would be helpful to have a reference to Federal and State laws or regulations specifically about whether interest income Vanguard attributes as "Outside the United States" with municipal bond funds is included in Federal and State income.
Are US territories considered outside the US for these purposes?

Income from the US territories is included in the reported dividends from Vanguard's national muni fund (as set forth on the linked Vanguard document listing sources). Adding back the total dividends, other than NY and US territories income, would not seem to result in double counting.

Turbotax is hardly a definitive source of tax law or regulation, but it has treated income from US territory munis the same as income from NY munis for the many years I've been using it. I would think someone would notice if the treatment was wrong, but one never knows.

I wonder if I'm missing something.
I've never seen tax software where the software "treated income" - it has always been my experience that the user has to tell it which income might have to be added or subtracted when preparing a state return.

With respect to the Federal return, the 1040 instructions state that the income reported in Box 12 on the Div goes on line 2a of 1040.
Turbotax asks for the source jurisdictions for muni funds, uses that information for preparing the state return and automatically does the adjustment. The issue here is the treatment of national muni income on a NY return. How to report on a 1040 seems clear to all.
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by jebmke »

exodusing wrote: Mon Apr 17, 2023 9:49 am
jebmke wrote: Mon Apr 17, 2023 9:38 am
exodusing wrote: Mon Apr 17, 2023 9:31 am
FactualFran wrote: Sun Apr 16, 2023 8:26 pm
exodusing wrote: Sun Apr 16, 2023 6:07 pm Are you disagreeing with the statement that income from muni bonds issued by NY and by the US territories is exempt from taxation in NY?

Muni income is exempt from federal taxation. For NY, you add back muni income from jurisdictions that are not exempt from NY taxation.

FWIW, TurboTax asks you to list muni income by jurisdiction (including a general "more than one state"). Attributing income from a national muni fund to, e.g., Guam, affects NY tax the same as attributing income to NY.
What I wrote was not disagreeing with the statement that income from muni bonds issued by NY and by the US territories is exempt from taxation in NY I wrote: "Doing that would exclude twice from State income the amount of tax-exempt income from outside the United States." My statement could be wrong. It would be helpful to have a reference to Federal and State laws or regulations specifically about whether interest income Vanguard attributes as "Outside the United States" with municipal bond funds is included in Federal and State income.
Are US territories considered outside the US for these purposes?

Income from the US territories is included in the reported dividends from Vanguard's national muni fund (as set forth on the linked Vanguard document listing sources). Adding back the total dividends, other than NY and US territories income, would not seem to result in double counting.

Turbotax is hardly a definitive source of tax law or regulation, but it has treated income from US territory munis the same as income from NY munis for the many years I've been using it. I would think someone would notice if the treatment was wrong, but one never knows.

I wonder if I'm missing something.
I've never seen tax software where the software "treated income" - it has always been my experience that the user has to tell it which income might have to be added or subtracted when preparing a state return.

With respect to the Federal return, the 1040 instructions state that the income reported in Box 12 on the Div goes on line 2a of 1040.
Turbotax asks for the source jurisdictions for muni funds, uses that information for preparing the state return and automatically does the adjustment. The issue here is the treatment of national muni income on a NY return. How to report on a 1040 seems clear to all.
Right but it isn't making the decision on treatment of possession income on the state return. That is an independent decision by the taxpayer and requires knowledge of the state return. TT doesn't "treat US territorial income ...." - it does what the user tells it to. Unless I'm missing something - I have to confess it has been a few years since I used TT but in the case of HRB and TaxSlayer Pro, the user must specify what portion of Box 12 is treated differently on the state return.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
exodusing
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by exodusing »

jebmke wrote: Mon Apr 17, 2023 9:54 am
exodusing wrote: Mon Apr 17, 2023 9:49 am
jebmke wrote: Mon Apr 17, 2023 9:38 am
exodusing wrote: Mon Apr 17, 2023 9:31 am
FactualFran wrote: Sun Apr 16, 2023 8:26 pm

What I wrote was not disagreeing with the statement that income from muni bonds issued by NY and by the US territories is exempt from taxation in NY I wrote: "Doing that would exclude twice from State income the amount of tax-exempt income from outside the United States." My statement could be wrong. It would be helpful to have a reference to Federal and State laws or regulations specifically about whether interest income Vanguard attributes as "Outside the United States" with municipal bond funds is included in Federal and State income.
Are US territories considered outside the US for these purposes?

Income from the US territories is included in the reported dividends from Vanguard's national muni fund (as set forth on the linked Vanguard document listing sources). Adding back the total dividends, other than NY and US territories income, would not seem to result in double counting.

Turbotax is hardly a definitive source of tax law or regulation, but it has treated income from US territory munis the same as income from NY munis for the many years I've been using it. I would think someone would notice if the treatment was wrong, but one never knows.

I wonder if I'm missing something.
I've never seen tax software where the software "treated income" - it has always been my experience that the user has to tell it which income might have to be added or subtracted when preparing a state return.

With respect to the Federal return, the 1040 instructions state that the income reported in Box 12 on the Div goes on line 2a of 1040.
Turbotax asks for the source jurisdictions for muni funds, uses that information for preparing the state return and automatically does the adjustment. The issue here is the treatment of national muni income on a NY return. How to report on a 1040 seems clear to all.
Right but it isn't making the decision on treatment of possession income on the state return. That is an independent decision by the taxpayer and requires knowledge of the state return. TT doesn't "treat US territorial income ...." - it does what the user tells it to. Unless I'm missing something - I have to confess it has been a few years since I used TT but in the case of HRB and TaxSlayer Pro, the user must specify what portion of Box 12 is treated differently on the state return.
Whatever tax software might do, the basic logic - divide muni income into income taxable in NY and not taxable in NY, with income from NY munis and US territory munis being not taxable in NY - seems correct. Do you disagree?

When I use TT, it asks for source jurisdiction for muni fund income as part of the Federal questions. I enter NY, Guam, PR, USVI and Other States. It treats Other States as a NY addition, but not the named jurisdictions. When I do the NY return, there's this screen:

Image
jebmke
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by jebmke »

exodusing wrote: Mon Apr 17, 2023 10:05 am Whatever tax software might do, the basic logic - divide muni income into income taxable in NY and not taxable in NY, with income from NY munis and US territory munis being not taxable in NY - seems correct. Do you disagree?
I do not disagree. What I disagree with is attributing decision making to the software. It is one of my pet peeves, especially with respect to retail tax software (and some non-retail). In particular, the interview mode has dumbed down the user population. I have noticed this even with my TaxAide volunteers who are trained every year on the tax law at the Federal and State level. Maybe I'm just a dinosaur now.

edit: one thing that is particularly unhelpful on the software front is that different packages operate completely different. H&R Block asks you the amount of tax exempt income that IS NOT taxed by your state. TaxSlayer Pro, asks you the amount of TE Income that IS taxed by your state [which, in the case of MD is added back].
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
FactualFran
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by FactualFran »

exodusing wrote: Mon Apr 17, 2023 9:31 am
FactualFran wrote: Sun Apr 16, 2023 8:26 pm What I wrote was not disagreeing with the statement that income from muni bonds issued by NY and by the US territories is exempt from taxation in NY I wrote: "Doing that would exclude twice from State income the amount of tax-exempt income from outside the United States." My statement could be wrong. It would be helpful to have a reference to Federal and State laws or regulations specifically about whether interest income Vanguard attributes as "Outside the United States" with municipal bond funds is included in Federal and State income.
Are US territories considered outside the US for these purposes?
A relevant section of the Federal law is 26 USC 103 (Interest on State and local bonds). According to the section, interest from State obligations are not included in adjusted gross income. According to subsection (c)(2): 'The term "State" includes the District of Columbia and any possession of the United States.'

A relevant section of New York law is Section 612. Subsection (b) is about additions made to Federal Adjusted Gross Income when determining th New York Adjusted Gross income. Subjection (b)(1) is
Interest income on obligations of any state other than this state, or of a political subdivision of any such other state unless created by compact or agreement to which this state is a party, to the extent not properly includible in federal adjusted gross income
New York income tax law, unlike Federal income tax, does not indicate whether the term "state" includes the District of Columbia and any possession of the United States.

In my opinion, because the New York law does not have it own definition of "state", the definition in corresponding Federal law should be used. What Vanguard attributes as interest income from "Outside the United States" with municipal bond funds should be included in New York Adjusted Gross Income.
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Aguilar
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Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by Aguilar »

I updated my tax software to account for the US territories. Ended up resulting in a nominal increase in my NY refund. Thanks
cas
Posts: 2258
Joined: Wed Apr 26, 2017 8:41 am

Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by cas »

FactualFran wrote: Mon Apr 17, 2023 2:00 pm A relevant section of the Federal law is 26 USC 103 (Interest on State and local bonds). of the United States.

[. . .]
As part of settling an estate, I needed to look up this sort of information (in order to compile 2022 tax preparation instructions for beneficiaries in various states.)

As part of this, I discovered that Ohio helpfully has a memo that gives the federal statutes that make various sorts of income tax-exempt at the state level. Other states I needed to deal with just sort of waved their tax-instructions hands and said "If the income isn't taxable at the state level because some federal law says it isn't taxable by any state, then it isn't taxable in this particular state." (But left it up to the tax-payer to find any such federal law.)

Is this excerpt from the Ohio memo the sort of federal law citation you are looking for? (Your earlier post today made me think that this wasn't what you were looking for; this most recent post makes me think maybe it is.)

Other interest income exempt from state taxation due to additional federal statutes:

[. . .]

bb. Territorial Obligations:
i. American Samoa - Interest from industrial development bonds for Eastern Samoa issued by
the Government of American Samoa (48 U.S.C. §1670),
ii. Guam - Interest from bonds issued by the Government of Guam (48 U.S.C. §1423a),
iii. Northern Mariana - Interest from bonds or other obligations issued by the Government of
the Northern Mariana Islands (48 U.S.C. §1801) and § 607 of the Covenant to Establish a
Commonwealth of the Northern Mariana Islands,
iv. Puerto Rico - Interest from bonds issued by the Government of Puerto Rico (48 U.S.C. §745),
and
v. Virgin Islands - Interest from bonds issued by the Government of the Virgin Islands (48
U.S.C. §1574(b)(ii)(A)).
For example, the Puerto Rico one says ...
All bonds issued by the Government of Puerto Rico, or by its authority, shall be exempt from taxation by the Government of the United States, or by the Government of Puerto Rico or of any political or municipal subdivision thereof, or by any State, Territory, or possession, or by any county, municipality, or other municipal subdivision of any State, Territory, or possession of the United States, or by the District of Columbia.
FactualFran
Posts: 2777
Joined: Sat Feb 21, 2015 1:29 pm

Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by FactualFran »

cas wrote: Mon Apr 17, 2023 3:30 pm ...

Is this excerpt from the Ohio memo the sort of federal law citation you are looking for? (Your earlier post today made me think that this wasn't what you were looking for; this most recent post makes me think maybe it is.)

Other interest income exempt from state taxation due to additional federal statutes:

[. . .]

bb. Territorial Obligations:
i. American Samoa - Interest from industrial development bonds for Eastern Samoa issued by
the Government of American Samoa (48 U.S.C. §1670),
ii. Guam - Interest from bonds issued by the Government of Guam (48 U.S.C. §1423a),
iii. Northern Mariana - Interest from bonds or other obligations issued by the Government of
the Northern Mariana Islands (48 U.S.C. §1801) and § 607 of the Covenant to Establish a
Commonwealth of the Northern Mariana Islands,
iv. Puerto Rico - Interest from bonds issued by the Government of Puerto Rico (48 U.S.C. §745),
and
v. Virgin Islands - Interest from bonds issued by the Government of the Virgin Islands (48
U.S.C. §1574(b)(ii)(A)).
For example, the Puerto Rico one says ...
All bonds issued by the Government of Puerto Rico, or by its authority, shall be exempt from taxation by the Government of the United States, or by the Government of Puerto Rico or of any political or municipal subdivision thereof, or by any State, Territory, or possession, or by any county, municipality, or other municipal subdivision of any State, Territory, or possession of the United States, or by the District of Columbia.
Thank you. A quote like the one from 48 USC 745 about bonds issued by the Government of Puerto Rico is what I was looking for.

It is interesting that the list of "Other interest income exempt from state taxation due to additional federal statutes" in the Ohio Department of Taxation memo includes: "s. District of Columbia's obligations". However, unlike other items in the list, that one does not cite a Federal statute.
cas
Posts: 2258
Joined: Wed Apr 26, 2017 8:41 am

Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by cas »

FactualFran wrote: Mon Apr 17, 2023 9:40 pm It is interesting that the list of "Other interest income exempt from state taxation due to additional federal statutes" in the Ohio Department of Taxation memo includes: "s. District of Columbia's obligations". However, unlike other items in the list, that one does not cite a Federal statute.
Now that you mention it, I do remember that the inclusion of District of Columbia on the list was a surprise to me, but then I was stymied by the lack of a reference to a source. I seem to recall that my search skills proved insufficient to find anything that let me know where that Ohio exemption came from and whether it would apply to other states. (But my not finding evidence doesn't mean that evidence doesn't exist.)
sycamore
Posts: 6360
Joined: Tue May 08, 2018 12:06 pm

Re: Help with my 2022 taxes -- how to handle munis in 1099 DIV?

Post by sycamore »

Side note, here's what North Carolina says in
Interest Income from Obligations of Other States:
North Carolina's individual income tax return may require an adjustment for interest received on notes and bonds. All taxpayers who received interest on notes and bonds from states other than North Carolina must add this interest income to the North Carolina return because this interest income has not been included on your federal return. Notes and bonds issued by Guam, Puerto Rico, and the U.S. Virgin Islands are not subject to this adjustment.
No specific mention of D.C.

Aren't taxes fun?
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