• Bond premium on tax exempt bonds help

    From Mom Wojslaw@21:1/5 to All on Sat Apr 9 10:24:26 2022
    On the 1099 INT I have tax exempt interest on line 8
    I also have Bond premium on tax exempt bonds on line 13
    I know where line 8 goes but does line 13 get reported anywhere on the 1040?

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  • From honda.lioness@gmail.com@21:1/5 to mooga...@gmail.com on Sat Apr 9 12:05:37 2022
    On Saturday, April 9, 2022 at 9:28:57 AM UTC-5, mooga...@gmail.com wrote:
    On the 1099 INT I have tax exempt interest on line 8
    I also have Bond premium on tax exempt bonds on line 13
    I know where line 8 goes but does line 13 get reported anywhere on the 1040?

    Assuming the taxpayer has a single 1099-Int:

    (1099-Int Line 8) — (1099-Int Line 13) = (Form 1040 Line 2A)



    From FreeTaxUSA.Com, when clicking for help on 1099-Int Line 13:

    <i>If you pay a premium to buy a bond, the premium is part of your cost basis in the bond. You can choose to amortize the bond premium.

    This generally means that each year, over the life of the bond, you use a part of the bond premium to reduce the amount of interest included in your income. If you make this choice, you must reduce your basis in the bond by the amortization for the year.

    You can also choose to not amortize the bond premium and just have the cost basis in the bond remain the same. The only difference is you get the tax benefit of the bond premium when the bond is sold or matures rather than getting a little bit of tax
    benefit each year from the amortized bond premium.

    For example, you buy a bond that has a face value of $1,000 for $1,100 that has 10 years left before the bond matures. In this example, the bond premium paid is $100. If you choose to NOT amortize the bond premium, your cost basis in the bond will remain
    $1,100. If you choose to amortize the bond premium over the 10 years of life the bond has left, then you would have an amortizable bond premium of $10 each year. You would enter that $10 as amortizable bond premium and it will reduce your taxable
    interest income by $10. Each year your cost basis in the bond would reduce by the $10. So after the first year, your cost basis in the bond would be $1,090 instead of $1,100, and after ten years your cost basis in the bond would be $1,000.</i>

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  • From msf@21:1/5 to honda....@gmail.com on Sun Apr 10 21:08:26 2022
    On 4/9/2022 12:05 PM, honda....@gmail.com wrote:
    On Saturday, April 9, 2022 at 9:28:57 AM UTC-5, mooga...@gmail.com wrote:
    On the 1099 INT I have tax exempt interest on line 8
    ...

    From FreeTaxUSA.Com, when clicking for help on 1099-Int Line 13:

    <i>If you pay a premium to buy a bond, the premium is part of your cost basis in the bond. You can choose to amortize the bond premium.

    This generally means that each year, over the life of the bond, you use a part of the bond premium to reduce the amount of interest included in your income. If you make this choice, you must reduce your basis in the bond by the amortization for the
    year.

    You can also choose to not amortize the bond premium and just have the cost basis in the bond remain the same.

    For tax-exempt interest, there is no choice.

    From Pub 550: "If the bond yields tax-exempt interest, you must
    amortize the premium." https://www.irs.gov/publications/p550#en_US_2021_publink100010250

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    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
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  • From honda.lioness@gmail.com@21:1/5 to msf on Mon Apr 11 03:33:19 2022
    On Sunday, April 10, 2022 at 8:09:11 PM UTC-5, msf wrote:
    On 4/9/2022 12:05 PM, honda....@gmail.com wrote:
    On Saturday, April 9, 2022 at 9:28:57 AM UTC-5, mooga...@gmail.com wrote:
    On the 1099 INT I have tax exempt interest on line 8
    ...

    From FreeTaxUSA.Com, when clicking for help on 1099-Int Line 13:

    <i>If you pay a premium to buy a bond, the premium is part of your cost basis in the bond. You can choose to amortize the bond premium.

    This generally means that each year, over the life of the bond, you use a part of the bond premium to reduce the amount of interest included in your income. If you make this choice, you must reduce your basis in the bond by the amortization for the
    year.

    You can also choose to not amortize the bond premium and just have the cost basis in the bond remain the same.
    For tax-exempt interest, there is no choice.

    From Pub 550: "If the bond yields tax-exempt interest, you must
    amortize the premium." https://www.irs.gov/publications/p550#en_US_2021_publink100010250


    Thank you for the correction. I see I mis-attributed what FreeTaxUSA.com says. What I quoted is not the help for 1099-Int Line 13. What I quoted is the help for 1099-Int Line 11 "Bond Premium."

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>

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