Question

Does Federal Tax-Exempt Interest and Dividends apply to Connecticut income tax?

Forum|Forum|1 year ago
February 6, 2025
1 reply
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No, unless the issued bonds are from the state of CT.

Typically mutual funds that invest in tax exempt bonds are invested in many states, and a percentage may be deductible on your state return.

You get that percentage amount from your mutual fund company. If they did not provide a breakdown, you check the box “I earned tax exempt dividends in more than one state” ("Multiple States" in the online program) on the first screen after entering the 1099-INT or 1099-DIV. Then select "More than one state" at the bottom of the state scroll down list.

If your mutual fund company provided you a breakdown*, you are only interested in your home state*. Multiply the % for your state by your total tax exempt dividends to get a $ amount (you can't enter the % in TurboTax [TT]). When asked which state, check the box "I earned tax exempt dividends in more than one state". In the drop down menu, select your state and enter the $ amount you calculated. In the 2nd box, select "More than one state*" (at the bottom of the scroll down list) and enter the remaining dollar amount.

*Most mutual funds will provide a breakdown. But you usually have to ask for it, or find it on their web site.

**Your state will tax all the dividends except the dividends from municipal bonds from your state and US Territories.

J

JP36

I have tax exempt dividends from two mutual funds.

On each mutual fund I have the amount of the tax exempt interest. Let's say one mutual fund has tax exempt interest of $100 and another has $200. My state is listed on each with a 10% rate. Is the amount I enter in turbo tax $30 and enter it with my state identifier?

Then turbo tax will subtract this amount from my state return?

Thanks