Enter source tax-exempt interest or dividend income for a state tax return (1041)

Complete these steps to enter tax-exempt interest or dividend income that is source tax-exempt income for a state tax return.

  1. Click the Income folder to open the Income screen.
  2. Open the Interest income (including foreign source) or the Dividends (including foreign source) statement .

    Note: The same statement is available on the K1 and K1T screens for the Interest income including tax-exempt or the Dividends field.

  3. Enter a postal code. If the postal code column is blank, the state will not recognize the amount as source income. 
  4. Enter an amount or percent in the InState Muni ($ or %) column to indicate the portion of the Total Tax Exempt column that is source tax-exempt income for the state in the Postal code column. If this field is blank, no portion of the tax-exempt income will be a state source.

Notes

  • Each line in the statement is a separate entry. A postal code and source amount or percent is necessary for each line.
  • Enter private activity bond interest amounts in both the Total Tax Exempt column and the Private Act Bond Portion column. Form 1041, Schedule I uses the private activity bond amount.

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