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Subject Author Date
HH Savings Bonds & 1040 Line 8b exempt P.Schuman 02-18-2008
Posted by P.Schuman on February 18, 2008, 3:17 pm
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 Received a 1099-int for our HH Savings Bond yearly interest of $200.
I entered this into TurboTax Box 3 on the Schedule B smart worksheet....
but it "appears" to be included as normal interest and nothing like I
expected -
to be shown on 1040 Line 8b as exempt interest ?
--
----------------------------------
"If everything seems to be going well,
you have obviously overlooked something." - Steven Wright




Posted by Andrew on February 18, 2008, 3:32 pm
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 P.Schuman wrote:
> Received a 1099-int for our HH Savings Bond yearly interest of $200.
> I entered this into TurboTax Box 3 on the Schedule B smart
> worksheet.... but it "appears" to be included as normal interest and
> nothing like I expected -
> to be shown on 1040 Line 8b as exempt interest ?

I don't know much about Series HH bonds never having owned one so take the
following for what it might be worth. I wonder if you think they're tax
exempt from the Feds? Usually, for example, Series EE aren't unless used
for some specific purposes (like higher education with some other caveats I
believe). You sure this is not it? (Probably exempt from state and local,
but I would bet they are not exempt from Federal taxes)

--
-------------------------------------------------------------
Regards -

- Andrew



Posted by PortStG on February 18, 2008, 5:17 pm
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"P.Schuman" wrote:
>Received a 1099-int for our HH Savings Bond yearly interest of $200.
>I entered this into TurboTax Box 3 on the Schedule B smart worksheet....
>but it "appears" to be included as normal interest and nothing like I
>expected - to be shown on 1040 Line 8b as exempt interest ?

No, HH Bonds are "Treasury Interest" which is taxable for Federal and
Exempt for State.

Rick


Posted by R. C. White on February 18, 2008, 5:45 pm
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Hi, P.

As Andrew and Port have said...

Generally (with many exceptions probably not pertinent here):

Interest on federal obligations is taxable on the federal return, but exempt
from taxation by the states.

Interest on municipal obligations is not taxable on the federal return;
treatment by the states varies greatly.

The federal exemption (Sec. 103 of the Internal Revenue Code) is not just
generosity on the part of Congress, and it is not primarily for the benefit
of the individual or other recipient of the interest. Such interest on "the
obligations of a State, a Territory, or a possession of the United States,
or any political subdivision of any of the foregoing, or of the District of
Columbia..." (as it read before 2006) is excluded from the definition of
Gross Income so as not to burden the state or subdivision, such as a city,
county, school district or other special district. If the municipality had
to issue only taxable bonds, then it would have to pay a higher interest
rate to compete with corporate bonds, and it would have to tax its citizens
more heavily to pay the higher interest. So the tax relief is intended for
the state or municipality and its citizens; the recipient of the interest
payments is only an incidental beneficiary.

In your specific case, I'd say that TurboTax got it right.

But remember, I've been retired a long time. I didn't even know about the
recent amendment to Sec. 103 until I looked it up online today
(http://www.law.cornell.edu/uscode/26/usc_sec_26_00000103----000-.html). So
be sure to check with your own CPA.

RC
--
R. C. White, CPA
San Marcos, TX
(Retired. No longer licensed to practice public accounting.)
rc@grandecom.net
Microsoft Windows MVP
(Currently running Quicken 2008 Deluxe in Vista Ultimate x64 SP1)

> Received a 1099-int for our HH Savings Bond yearly interest of $200.
> I entered this into TurboTax Box 3 on the Schedule B smart worksheet....
> but it "appears" to be included as normal interest and nothing like I
> expected -
> to be shown on 1040 Line 8b as exempt interest ?


Posted by Oilcan on February 18, 2008, 7:35 pm
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This is not a Tax newsgroup. Most of your comments lately are directed
towards tax. Perhaps you should look there for your answer.

Oilcan
> Received a 1099-int for our HH Savings Bond yearly interest of $200.
> I entered this into TurboTax Box 3 on the Schedule B smart worksheet....
> but it "appears" to be included as normal interest and nothing like I
> expected -
> to be shown on 1040 Line 8b as exempt interest ?
> --
> ----------------------------------
> "If everything seems to be going well,
> you have obviously overlooked something." - Steven Wright
>
>
>


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