If your state does not tax interest earned from U.S. Savings Bonds or certain U.S. Treasury obligations, you can enter that amount in the tax software so it isn't included in your state tax calculation. Many states exempt this type of interest from state income tax, even though it's still taxable on your federal return. Entering the amount correctly can help ensure your state return is accurate.
How to Enter U.S. Savings Bond Interest
Follow these steps in the program:
- Go to Federal.
- Select Income, then choose My Forms.
- Open 1099-INT, DIV, OID.
- When asked, "Did you earn any interest or dividend income from a bank, brokerage firm, or other financial institution?", continue to the interest income section.
- Select Interest Income (Form 1099-INT) and choose Continue.
- Enter the amount in the field labeled:"Amount of Interest on U.S. Savings Bonds and Treasury Obligations that you want subtracted from your state return."
After you enter an amount, a drop-down menu will appear. Select the state that should exclude the interest from state income tax.
Where Do I Find This Amount?
Look at Box 3 of your Form 1099-INT, titled:
Interest on U.S. Savings Bonds and Treasury Obligations
If only part of the amount qualifies for a state subtraction, enter only the portion that is exempt in your state.
Check Your State's Rules
Not every state treats U.S. Savings Bond and Treasury interest the same way. Before entering a subtraction amount, verify whether your state taxes this income. If your state exempts the interest, enter the eligible amount in the Box 3 subtraction field to remove it from your state tax calculation while keeping it properly reported on your federal return. Always review your state's current tax rules if you're unsure whether the interest qualifies for a state tax exemption.