Question

Is TT incorrectly calc taxable interest to be reported on CT ST 1040. Query asks for (state) TAXABLE amt but inputs this on CT1040 and subtracts from fed gross.Backwards?

Forum|Forum|1 year ago
March 24, 2025
2 replies
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Interest on my federal treasury bonds is non-taxable in CT. TT correctly pulls in total of all interest income from fed form, then asks for taxable amount (in CT State step by step query). It then uses this "taxable" on line 4 of CT1040 (subtractions from fed gross). I think this is backwards, it should be subtracting the NON-taxable amount so the result is only what is taxable in CT. Am I missing something here. Seems like this could be wrong on every state form

TurboTax Online

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GoIrish49Author

I cant edit my post or change the tag but want to add that this is for the desktop version of turbotax. The software is incorrect in using the taxable interest value typed into the query response. Maybe the query should be changed to ask for the non-taxable amount if that is how TT intended it to be used. I will be using the free state provided tax filing system as that is correctly incorporating the taxable interest.

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mglauner

Yes, there is a query where you enter interest that is taxable in Connecticut, but not for Federal, so adds that amount to CT income on the 'Other Additions' worksheet, Line 6 and is included on CT 1040, Line 2. There's a second screen later that asks for interest that was taxable on your Federal return, but is not taxable in CT.

This amount would then be subtracted from CT income as shown on Schedule 1, Line 41and included in the amount on CT 1040, Line 4 as a subtraction. You should be able to edit both those screens from the interview screen 'Here's the income that CT handles differently'

Double-check your entries; sometimes the wording in the interview can be confusing.

@GoIrish49

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GoIrish49Author

Thank you for your response but my conclusion after walking through the query again with yours as reference is I still believe the software is making an error.

My situation is that all interest is taxable at fed level, nothing non-taxable at fed level, only a portion is non-taxable for CT.

The CT query is like yours, where it asks "..is any non-taxable in CT". When i select Yes, the next screen asks you to enter the amount that is taxable (presumable this has to be what is taxable in CT). I've experimented here and whatever value i put in that response, TT subtracts it from the gross on ct 1040 line 4.

It should be subtracting the amount that is non-taxable in CT so I think the query wording is incorrect where it asks you to enter the taxable amount. in my screenshots, 1645 is total interest at fed level (245 is non-taxable treasury amount). Entering 1400 in the query (the taxable amount for CT) results in TT subtracting this amount from the CT gross. I'm curious in your example, how did TT treat the $200 on the state form?

IsabellaG

I agree that the wording on the Interest Income Adjustment screen should be changed to better indicate that the amount entered will reduce the taxable interest income for Connecticut. Following your example, the amount entered in that screen is carried to line 4 of the CT-1040, and reduces the taxable income to CT, as you demonstrated.

I will forward this information to the developers. Thank you for pointing this out.

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