How to determine percentage of US Government Source Income for ETF investments?
Hey tax folks, I've been working on my taxes and have a question about figuring out US Government Sourced interest income from some ETFs I'm holding. I've got a few ETFs in my portfolio that are mainly government debt. For example, I've been holding Black Rock iShares SGOV ETF. I found their supplemental tax info document that shows 96.45% of dividends were US Government Sourced Interest. So when I look at my 1099, I can see the total dividends from SGOV, and I'm assuming I just multiply that by 96.45% to get the US Government Sourced Interest amount. Does that sound right or am I missing something? My other question is about SPDR (State Street) funds. I've been looking everywhere but can't seem to find a similar document for their BIL fund. I need to determine what percentage to use for calculating the US Government Sourced Interest for SPDR BIL. I did find a spreadsheet from SPDR with some info, but I'm not sure if I'm looking at the right numbers. Any help would be greatly appreciated! This is my first time dealing with government securities and I want to make sure I'm reporting everything correctly for 2025.
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Zara Shah
You're on the right track with your calculations for the BlackRock iShares SGOV ETF. Using the percentage they provide (96.45%) and multiplying it by your total dividends from that fund is exactly how you determine your US Government Sourced Interest income. These percentages are provided specifically for tax reporting purposes. For SPDR funds like BIL, their tax information can be a bit harder to find. State Street typically provides this information in their "Tax Information" section on their website. Look for a document called "Income Characterization" or "Tax Characteristics" for the specific fund. For BIL specifically, since it's a Treasury Bill ETF, you'll likely find that a very high percentage (possibly over 95%) is US Government Sourced Interest, similar to SGOV. The reason this matters is that US Government Sourced Interest is exempt from state and local taxes in most states, which can be a nice tax advantage for these types of investments.
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Luca Bianchi
•Thanks for the info! Quick follow-up: If I can't find the exact percentage for SPDR BIL anywhere on their site, would it be reasonable to assume it's similar to comparable Treasury ETFs like SGOV? Or would that be risky from a tax perspective?
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Zara Shah
•It would be reasonable to use a comparable Treasury ETF as a reference point, but I wouldn't recommend assuming the exact same percentage. Each fund might have slightly different holdings or cash positions that affect the final percentage. Your best bet is to contact SPDR investor services directly - they're required to have this information and can provide it to you. For tax purposes, being conservative is usually the safer approach. If you absolutely cannot get the exact figure, you might consider using a slightly lower percentage than comparable funds to avoid any potential issues. Remember though, using estimates without documentation could potentially raise questions if you're ever audited.
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GalacticGuardian
I had a similar issue last year with figuring out government interest income. I discovered taxr.ai (https://taxr.ai) really helped me sort through all my investment documents. I uploaded my 1099s and fund documents, and it automatically identified which portions were US Government Sourced Interest across multiple ETFs including some SPDR funds. What's cool is it creates a detailed report showing all the calculations and percentages, so you have documentation if you ever need it for an audit. It saved me hours of hunting through fund websites trying to find obscure tax documents.
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Nia Harris
•Does taxr.ai work with other investment types too? I have some dividend stocks and municipal bonds that give me headaches every tax season.
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Mateo Gonzalez
•I'm skeptical about these tax tools. How accurate is it with government interest calculations? Last thing I need is a tax notice because some algorithm got it wrong.
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GalacticGuardian
•It definitely works with dividend stocks and municipal bonds. The platform has specific features for categorizing dividend income by qualified vs non-qualified dividends, and it handles municipal bond interest calculations including AMT implications. For government interest calculations, I found it to be very accurate. It uses the official published percentages from fund providers when available, and for funds that don't publish the data prominently, it accesses specialized databases that aggregate this information. Every calculation comes with a source citation, so you can verify everything yourself if you want. That's actually what gave me confidence in using it - being able to see exactly where the numbers came from.
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Mateo Gonzalez
Just wanted to follow up on my skepticism about taxr.ai. I decided to give it a try with my government bond ETFs and other investments, and I'm genuinely impressed. It found the US Government Source Income percentages for all my SPDR funds that I couldn't locate myself, including BIL which was showing 97.12% US Gov sourced. The platform even flagged that one of my ETFs had a small portion of income that was actually subject to state tax despite being a "government" fund (apparently it held some non-government securities). That's something I would have missed completely. The documentation it provided for each calculation was thorough enough that I feel confident using these figures on my return.
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Aisha Ali
If you're still having trouble getting answers from fund websites, I recommend using Claimyr (https://claimyr.com) to get through to someone at the IRS who can clarify. I spent weeks trying to figure out how to properly report some government interest income, then used Claimyr to get a callback from the IRS in about 15 minutes instead of waiting on hold for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with walked me through exactly how to report US Government Sourced Interest from various funds and confirmed that using the published percentages is the correct approach. She even emailed me some reference materials after our call. Much better than guessing or relying on forum advice (no offense to anyone here!
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Ethan Moore
•How does this Claimyr thing actually work? I thought it was impossible to get the IRS on the phone. Last time I tried I was on hold for 2+ hours and eventually gave up.
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Mateo Gonzalez
•Yeah right. There's no way something like this actually works. The IRS is basically unreachable these days. And even if you do get through, they never give clear answers about investment tax questions - they just tell you to "consult a tax professional.
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Aisha Ali
•It works by essentially navigating the IRS phone system for you and holding your place in line. When an agent becomes available, Claimyr calls you back and connects you immediately. It's completely changed how I deal with tax questions. You're right that the IRS can be difficult to reach through normal channels, which is exactly why this service exists. Last tax season, average wait times were 3+ hours if you could get through at all. What surprised me most was that the IRS agents I've spoken with have been quite knowledgeable and helpful once you actually reach them. The frustration is just in getting through - which is what Claimyr solves. For specialized questions like government source income, they were able to connect me with someone in the right department who had the specific knowledge needed.
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Mateo Gonzalez
I need to eat my words about Claimyr. After my skeptical comment, I decided to try it since I had a complex question about my government bond fund taxation that forums couldn't solve. Got a call back from the IRS in about 20 minutes - compared to my previous 3-hour hold that ended with a disconnection. The agent clarified exactly how to handle US Government Source Income from ETFs when the fund provider doesn't publish the percentage. Turns out there's an IRS publication that specifically addresses this, which the agent emailed to me. Also confirmed that yes, you can use the percentages directly from the fund's tax supplemental info docs like OP was doing. For anyone with government bond ETFs or similar investments, definitely worth getting clear guidance rather than guessing.
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Yuki Nakamura
I work with a lot of clients who hold government bond ETFs, and here's a trick for finding those elusive State Street SPDR percentages: don't look for a document called "supplemental tax information." Instead, look for "income characterization" reports. For BIL specifically, last year's amount was around 96-98% US government sourced income. Also, worth noting that this matters mainly for state income tax purposes. If you live in a state with no income tax, you don't need to worry about this calculation at all!
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Sean O'Brien
•This is incredibly helpful! I've been looking in the wrong place on their website. So to clarify, I should be looking specifically for "income characterization" reports for SPDR funds?
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Yuki Nakamura
•Yes, that's exactly right. On the SPDR website, navigate to the specific fund page for BIL, then look for the "Resources" or "Documents" tab, and find the section for tax documents. The "Income Characterization" report is usually released in January or February for the previous tax year. One more tip - if you call SPDR investor services directly, they can actually email you this information for any of their funds. I've found their support team to be surprisingly helpful compared to some other fund companies. Just have your account information ready when you call.
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StarSurfer
Dumb question maybe, but why does it matter what percentage is US Government Sourced Interest? Is this just for state tax purposes or does it affect federal taxes too?
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Zara Shah
•Not a dumb question at all! The primary benefit is for state and local taxes. Income from direct US government obligations (like Treasury bonds) is exempt from state and local income taxes in most states. However, when you own these through an ETF, only the portion that's actually from government securities qualifies for this exemption - hence needing to know the percentage. It generally doesn't affect your federal taxes - you'll pay federal income tax on all the interest regardless of the source. There can be some minor implications for foreign tax calculations if you're claiming foreign tax credits, but for most investors, it's all about the state tax benefit.
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Zara Perez
Great question, Sean! You're absolutely correct about the BlackRock SGOV calculation - multiplying your total dividends by 96.45% is exactly the right approach. For SPDR BIL, I had the same issue last year. What worked for me was calling SPDR investor relations directly at 1-866-SPDR-ETF. They were able to email me the exact percentage within a few hours. For BIL in 2024, it was around 97.8% US Government Sourced Interest, but you'll want the current year's figure. One thing to watch out for - make sure you're looking at the right tax year's data. Some funds update their supplemental tax documents late in the year, so double-check the reporting period matches your tax year. Also, since this is your first time with government securities, remember to report this correctly on your state return if your state has income tax. The US Government Sourced portion should be exempt from state taxes in most states, which can save you a decent amount depending on your state's tax rate.
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