Accrued Interest reporting

asaadsaad

Last month I bought a treasury bond on the secondary market and I paid accrued interest. I don't have plans to sell the bond. I learned that the form-1099-INT does not handle accrued interest. My questions are:

1. Do I have to report the accrued interest if I'm not selling the bond, if yes, how?
2. Since treasury bonds are excluded from my local state tax, does FreeTaxUSA handle this case when filing my taxes, or should I do anything special?

AlexO

asaadsaad,

That is a great question!

You are correct that the accrued interest you paid generally won't be reported on Form 1099-INT. Instead, you'll enter this yourself when reporting your Form 1099-INT within FreeTaxUSA. When you enter your Form 1099-INT, simply enter an amount for "Accrued Interest (not common)'.

FreeTaxUSA does handle your case. When you enter the Form 1099-INT and report the interest in box 3, it will be excluded from your state tax.

BradyP

Hi Asaadsaad,

If you buy a bond in between the interest dates, the accrued interest from before you buy the bond will be included in your 1099-INT as taxable income. You can deduct the accrued interest from the 1099-INT amount on your tax return through an adjustment. To do this within FreetaxUSA: simply add it to the "accrued interest" box towards the bottom of the page when entering the 1099-INT you receive for the bond.

Hope this helps!