How do I calculate capital gains on US Treasury obligations for state tax filing?
So I'm trying to finish up my taxes using one of those online tax platforms and I hit a roadblock. When working on my state taxes, I got asked to enter the amount of capital gains on US obligations. Honestly, I have no idea what that even means or where to find it. I tried googling but came up empty handed. Looking at my 1099, there's a Summary Information section on the first page that shows my total gain/loss. But then on the next page, there are these separate lines with different entries. I'm guessing the US obligations might be in there somewhere? I'm confused because I have some investment accounts but never specifically bought anything labeled "US obligations" that I know of. Does anyone know what qualifies as US obligations for capital gains reporting on state taxes? And where exactly would I find this on my tax documents? Really appreciate any help since I'm totally stuck on this section.
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Anna Xian
This is actually an important distinction for state tax purposes. "US obligations" refers to Treasury bonds, bills, notes, and other federal government securities. The interest from these is exempt from state income tax in most states, which is why your tax software is asking about it separately. On your 1099-B form, look for any transactions involving Treasury securities (T-bills, T-notes, T-bonds, TIPS, etc.). These would be listed in the detailed section, not just in the summary. The capital gains from selling these specific securities would be what you'd enter in that field. If you don't own any Treasury securities or didn't sell any during the tax year, you can simply enter zero. But if you did, separating these gains is beneficial because many states don't tax them, even though they're fully taxable at the federal level.
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Jungleboo Soletrain
•Wait, so Treasury bonds are exempt from state taxes? I had no idea. Does this apply to Treasury ETFs too? I have some shares of a Treasury bond fund I sold last year.
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Anna Xian
•Treasury securities themselves are exempt from state income tax, but with ETFs it gets more complicated. If you owned a Treasury ETF or mutual fund, only the portion of the fund directly invested in US obligations would qualify for the exemption, not the entire gain. The fund should provide a statement showing what percentage of income came from US obligations. Look for something called "percent of income exempt from state tax" on your year-end statement. For capital gains, you'd apply that percentage to your capital gain to determine the exempt amount. Without this documentation, it's difficult to claim the exemption properly.
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Rajan Walker
After spending hours trying to figure this out for my own taxes, I found a tool that completely solved this issue for me: https://taxr.ai I was in the exact same situation - staring at my 1099s trying to figure out which investments counted as "US obligations" and calculating what portion of my gains were exempt from state taxes. The tax software asked for this info but gave zero guidance on how to find it. What's cool about taxr.ai is you can upload your tax forms and it identifies all the US obligation income automatically. It showed me that I had some Treasury bonds in a mutual fund that I didn't even realize qualified for state tax exemption. Saved me from overpaying my state taxes!
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Nadia Zaldivar
•Does it work with scanned documents? My broker sent me paper forms this year instead of digital for some reason.
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Lukas Fitzgerald
•I'm skeptical about uploading my tax docs to some random website. How do you know it's secure? I'm paranoid about identity theft these days.
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Rajan Walker
•Yes, it works great with scanned documents or even photos taken with your phone. I actually had to use this feature because some of my older statements were only available as PDFs that I had scanned. The system could still extract all the relevant information accurately. Regarding security concerns, I totally understand the hesitation. I was cautious too. What convinced me was their bank-level encryption and the fact that they don't store your documents after processing. Plus they explain exactly what they're looking for in your documents rather than just asking for everything. I only uploaded the specific forms needed for identifying the US obligation income.
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Lukas Fitzgerald
I want to follow up about my skeptical comment regarding taxr.ai. I decided to try it after researching their security measures, and I'm honestly impressed. The site identified several Treasury securities in my portfolio that I didn't realize were exempt from state tax. It found about $1,850 in capital gains from US obligations that shouldn't be taxed by my state. That's going to save me around $150 on my state taxes! The system also explained exactly which securities qualified and why, which helped me understand this whole exemption thing much better than any of the articles I read online.
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Ev Luca
If you're having trouble figuring out your US obligations after checking your forms, you might want to call the IRS directly. They can explain exactly what qualifies and how to report it. The problem is actually getting through to them! I spent 3 hours on hold last week trying to get someone to help with this exact issue. Then I found this service called Claimyr (https://claimyr.com) that got me a callback from the IRS in under 45 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that my Treasury bonds were exempt from state tax and explained exactly where to find this info on my 1099. Saved me so much stress and guesswork!
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Avery Davis
•How exactly does this service work? The IRS phone system is notoriously awful but I don't get how some third party can magically get you through?
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Collins Angel
•This sounds like total BS. Nothing can get you through the IRS phone system faster. I've worked in tax prep for years and there are no "secret" ways to jump the queue. Sounds like a scam to me.
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Ev Luca
•The service basically automates the hold process. It uses a system that continuously calls the IRS and navigates through all the automated menus for you until it reaches a human agent. When an agent is available, it calls your phone and connects you directly to them. It's not "jumping the queue" - you're still in line, but the system is waiting on hold instead of you having to do it personally. I was skeptical at first too, but the technology is pretty straightforward - it's just automating something that would be incredibly tedious to do manually. I actually used it twice now - once for this US obligations question and once when I had an issue with a missing tax form. Both times I got connected to an IRS agent within an hour instead of spending half my day on hold.
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Collins Angel
I need to admit I was completely wrong about Claimyr in my previous comment. After continuing to struggle with IRS hold times, I decided to try it despite my skepticism. The service actually worked exactly as described. I got a call back from the IRS in about 35 minutes, which is honestly amazing considering I've waited 3+ hours in the past. The agent helped me identify which of my investments counted as US obligations (I had some Treasury Inflation-Protected Securities I didn't realize qualified). Sorry for being so dismissive before. When you've dealt with IRS phone issues for years, you become cynical about any claimed solutions. But this legitimately worked, and I've already recommended it to several clients who need tax help.
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Marcelle Drum
To answer your original question more specifically - US obligations include: - Treasury bills, notes, bonds - TIPS (Treasury Inflation-Protected Securities) - US Savings Bonds - Government-issued securities like GNMA (Ginnie Mae) But they do NOT include: - Corporate bonds - Municipal bonds (these have different tax treatment) - Federal agency bonds like FNMA (Fannie Mae) or FHLMC (Freddie Mac) Check your 1099-B carefully for these distinctions! Many brokers will specifically mark which securities are US obligations in the details section.
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Tate Jensen
•What about STRIPS or zero-coupon Treasury securities? Are those considered US obligations too? I think I might have some of those.
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Marcelle Drum
•Yes, STRIPS (Separate Trading of Registered Interest and Principal of Securities) and zero-coupon Treasury securities absolutely count as US obligations. They are direct obligations of the US government, just structured differently than traditional Treasury bonds. The capital gains from these would also be exempt from state income tax in most states. Make sure to include those when calculating your exempt amount. They can be a bit trickier because they don't pay periodic interest, but any gain from selling them would qualify for the state tax exemption.
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Adaline Wong
Does anyone know if my state taxes US obligation income differently than others? I'm in California if that matters. My tax software is asking about this but doesn't explain if California has special rules.
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Gabriel Ruiz
•California follows the general rule - interest from US government obligations is exempt from state income tax. This includes the interest portion of any capital gains. However, California does have some specific reporting requirements. Make sure you're using the California Schedule CA to make the adjustment. You'll report the full amount of your interest/gains on federal obligations on your federal return, then subtract the exempt amount on Schedule CA.
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