22:. To properly enter this and resolve the diagnostic, net the amount of Municipal Bond interest by subtracting $100 from the $500 total and entering $400 in the applicable Municipal bond input field. When sold for more of the face value, they are sold with a premium; when less than face value, a discount. Client has 1099-Int and within the paperwork there is an amount for "Noncovered Bond Premium on Tax-Exempt Bond" and an amount for Welcome back! Ask questions, get answers, and join our large community of tax professionals. However, some bonds, such as municipal bonds, may be exempt from federal and state taxes. com. Refer to the screenshots below. At least, that's how it's handled for tax-exempt Muni Bonds. Fund management. Bond premium $ 12 . Vanguard today launched the Vanguard Short-Term Tax-Exempt Bond ETF (NYSE Arca: VTES). The discount is also amortized and increases the amount of t/e. This entry is used to reduce taxable interest entries that carry to Schedule B. *. In the case you provided where there is $30,000 of tax-exempt interest. 000% Dated Date: 05/01/2020 Maturity Date: 02/15/2027acquired with acquisition premium. Box 6 - Acquisition premium. The same principle applies to Nominee. Complete this screen as if your Tax-Exempt Dividend Income was reported in Box 8 of a 1099-INT. tax but exempt from New York income tax must be subtracted from federal adjusted gross income in computing New York adjusted gross income. A percentage of the income is exempt from state income tax. For taxable bonds, the adjustment will reflect on Schedule B, Part 1. The new ETF will complement our existing actively managed limited-term and ultra-short-term tax-exempt. That is the amortized premium paid above and beyond interest payable on covered securities and is used to offset interest received. Do not include the accrued interest that you may have paid at the purchase date. Higher coupons deliver more of the return sooner. Because the interest payments on the debt instrument are qualified stated interest, the stated redemption price at maturity of the debt instrument is $100,000. State identification no. The federal return asks if any portion was from US Government Interest. Box 13 Bond premium on tax-exempt bond X Box 14 Tax-exempt and tax credit bond CUSIP no. For example, an investor in a 25% tax bracket would receive the same after-tax income from a tax-exempt bond bearing interest at 6% that he or she would receive from a taxable obligation. (3) Cross reference. That process includes extensive fact-gathering and analysis by bond counsel to ensure that the bonds will be in compliance with federal tax law requirements. That is, a bond issued at a discount might be trading at a premium price (above par) on the bond exchange. - Form 1099-INT box 11, and. 00 10- Exempt-interest dividends (includes line 11) 0. So if you paid $50 of accrued interest when you bought Bond 1, and $100 when you bought Bond 2, and you collected $130 on Bond 1 and nothing on Bond 2, you get to deduct the $50 paid (because 50<130) and carry the rest forward (because 100>0). The reissuance rules apply to all tax-exempt bonds from a large bond issue to a small. A holder must amortize bond premium on a bond that is a tax-exempt obligation. That tells you how much to amortize on a monthly basis. See Box 13 Bond premium on tax-exempt bond X Box 15 State B&D Interest Income State W/H Box 16 State identification no. 09%. See the instructions above for a tax-exempt covered security acquired at a premium. Gen. Vanguard Short-Term Tax-Exempt Bond ETF (VTES) is built to help you earn consistent, tax-exempt income. Vanguardfi Ultra-Short-Term Tax-Exempt Fund As of September 30, 2023 InvestmentApproach Short-term municipal bonds. Non-California state bonds. Treasury Obligations shows the bond premium for the year for covered U. This has been very helpful. Box 13 Bond Premium on Tax-Exempt Bond: $64. Submitted by David Ch on 05-04-2021 03:18 PM. It is a municipal bond that matured and the premium was more than tax exempt amount. You can delete Schedule B using these steps: Select Tax Tools from the menu on the left. If you receive income from bonds or other obligations that are exempt from Illinois Income Tax, the exempt amount you are entitled to claim is the interest net of bond premium amortization. Credit Quality / Interest Rate Sensitivity —. Go to Interest and Dividend Income. The tax reporting requirements outlined are not appli-cable if bonds are owned inside an IRA or other retirement plans. As of November 13, 2023, the fund has assets totaling almost $16. (iii) Bond premium allocable to the first accrual period. (If the bonds are tax-exempt bonds, any such. In Box 110 -. 2 of Notice 2010. To. Accrued Market Discount: The gain in the value of a discount bond expected from holding it for any duration until its maturity. 1. Taxable Interest $30. If you bought a TAX-EXEMPT bond at a PREMIUM and sold it PRIOR to maturity. For single bonds or accounts containing a single bond, enter the CUSIP number of the tax-exempt bond for which tax-exempt interest is reported in box 8 or tax credit bond (including build. 1. The interest payments on the bond are qualified stated interest. bond that is treated as tax-exempt interest to the discount that produces a yield to maturity equal to the coupon rate of interest on (or, at the purchaser’s election, the original yield to maturity of) the whole tax-exempt bond. (b)(1)(B). 06. To enter exempt interest dividend and specified private activity in Turbo Tax: Also, if you acquired a tax-exempt OID bond at an acquisition premium, only report the net amount of tax-exempt OID on line 2a (that is, the excess of tax-exempt OID for the year over the amortized acquisition premium for the year). The bond premium allocable to the accrual period ending on February 1, 2000, is. Form 8038-CP - Availability of Electronic Filing; Mandatory Electronic Filing for Certain Filers in 2024. TL 32075 Destinations of Shared Data from Source Data Entry: UltraTax CS(taxable, treasury, tax exempt, tax exempt subject to AMT) that represent the total amount reported in box 11 (bond premium). So when the bond matures, your basis will be the face value of the bond. See 2019 Form 1040 Instructions. 00 9- Noncash liquidation distributions 0. read more Gagan, CPAthat are exempt from income tax providing these amounts are included in your Illinois base income. However, some interest you receive may be tax-exempt. - click "I amortized a premium," and. If you receive income from bonds or other obligations that are exempt from Illinois Income Tax, the exempt amount you are entitled to claim is the interest net of bond premium amortization. The total amount or a portion of tax-exempt income (reported as Specified Private Activity Bond Interest) must be taken into account in computing the federal alternative minimum tax applicable to individuals, and may be subject to state and local taxes. If you have an amount listed in Box 13, please disregard unless you are. 00 7- Foreign country or US possession: 6- Foreign tax paid: 0. Also, if you acquired a tax-exempt OID bond at an acquisition premium, only report the net amount of tax-exempt OID on line 2a of your Form 1040 or 1040-SR (that is, the excess of the tax-exempt OID for the year over the amortized acquisition premium for. You would enter that on Screen 11 under Tax-Exempt Interest on the line for "Amortizable bond premium on tax-exempt bonds". It also required that municipal bonds must meetVanguard's $199 billion municipal bond lineup includes a wide range of actively managed national, state-based, high-yield, and money market funds, as well as the $20. General Explanation of Tax-Exempt Bonds 1. For a specified private activity bond with OID, report the tax-exempt OID in box 11 on Form 1099-OID and the tax-exempt stated interest in boxes 8 and 9 on Form 1099-INT. Deduct the Acquisition Premium ($790) from the Tax Exempt OID to get the taxable amount ($3700 - $790 = $2910). VTES may be suitable for tax-sensitive investors with a short-term time horizon and low interest rate risk tolerance. The optional redemption provision allows the government issuer to refinance the outstanding bonds with refunding bonds. • Although there is a box for. What should I enter in the Type Code field in the interest and dividends statements? How do I enter income from a private activity bond? How do I enter income that is tax-exempt at the federal level, but taxable at the state level?Box 11 is the bond premium. 6045-1 (n) (7) (ii) (A). That loss can be taken at maturity or it can be spread out over the life of the bond. - Market discount (noncovered lots) 0. Follow these steps to make a manual adjustment for the bond premium you paid on your tax-exempt bonds: Select Federal Taxes; Under Wages & Income select Interest on 1099-INT; Enter your 1099-INT information, select Continue; Select I need to adjust the taxable amount, select Continue; Enter the state that pays your tax-exempt. A factor that can greatly reduce the price volatility of bonds is the presence of. Fields highlighted in yellow import into the UltraTax CS Source Data Entry application. Under your last entry on line 1, put a subtotal of all interest listed on line 1. However, at year-end, the purchaser will receive a Form 1099-INT Interest Income showing the total interest received. Also, if you acquired a tax-exempt OID bond at an acquisition premium, only report the net amount of tax-exempt OID on line 2a of your Form 1040 or 1040-SR (that is, the excess of the tax-exempt OID for the year over the amortized acquisition premium for. to you on Form 1099 each year since you bought the bond. However, if tax-exempt bonds incorporate a tax-related convenience premium, these premia may be larger in high-tax states where the protection from taxation these bonds provide may be particularly prized by tax-averse investors. Expenses (other than interest expense) connected with federally tax-exempt income that is taxable to New York State: X: X: X: X: S-204: Amortizable bond premiums on bonds that generate federally tax-exempt interest income that is taxable to New York State: X: X: X: X: S-205: Wage and salary expenses allowed as federal credits but not as federal. In box 112 - FS, enter S. Report the bond’s interest on Schedule B (Form 1040A or 1040), line 1. Municipal bonds have a face value. If adjustments for bond premiums are not reflected on your 1099-INT, you can manually enter the bond premium adjustment in the 1099-INT section of TurboTax. Tax-exempt bonds are barred a deduction for amortizable bond premiums under IRC section 171 (a) (2). It is a municipal bond that matured and the premium was more than tax exempt amount. Options. But even though no deduction is allowed, tax-exempt bonds still must amortize the premium on the books under IRC. (ii) Amount of bond issuance premium. The accrued interest is taxable to the seller, whereas the interest that is earned from the date of purchase to the end of the year is taxable to the purchaser. How to enter an election to amortize bond premium. Then select. Market discount $ 11 . Y. For bonds issued after 1984, the OID is treated as interest. In Box 85 - Bond premium on tax-exempt bond, enter the amount of bond premium related to the federal tax-exempt interest. , prepayment date without penalty) approximately 10-years from the date of issuance. See § 1. Reg. The Treasury bond interest is reported in box 3, but that 1099-INT also has box 1 and box 8 $$ on it. 75-1 Treatment of bond premiums in case of dealers in tax-exempt securities. Bond premium on Tax-Exempt Bond. Commissioner of Revenue. Enter on 1099-INT worksheet, Box 1 - Interest income. Fidelity Learn. Level 15. . bonds will be offered and traded at a “discount. 4- Federal income tax withheld 0. 74 years, while the duration of the 3% premium bond would be 4. S Treasury securities. I have a client that has Tax exempt interest OF $32,958 on line 8 of his 1099-INT. See Publication 1212 if this applies for instructions on how to calculate the taxable portion. Ordinary Dividends - Select New and enter the details. 31% (0% in CA, CT, NY) Fidelity Treasury Money Market Fund (FZFXX) 0. In box 11, Bond Premium, put the amount. No. (Sections 612(c) (1) and (c) (2) of the. The amount of OID tax paid includes that of all previous holders of the bond. (a). 42%. If the sale price is higher than the purchase price, there may be a gain on the sale. For example, a bond with a $1,000 face value may be sold for $900. For young or lower income tax payers it is probably fine to. While still exempt from Federal Income Tax, such amounts will be reported to the Internal Revenue Service. Currently our investments are 33% in tax deferred accounts, 5% in Roths and >60% in taxable accounts. See the Instructions for Form 6251, Alternative Minimum Tax for Individuals. Client has CA muni bond with tax exempt interest but also a bond premium reported in box 13. This amount is included in line 8. Tax-exempt bonds can trade at a significant discount to par when interest rates are high. However, if you acquired a tax-exempt bond at a premium, only report the net amount of tax-exempt interest on line 2a of your Form 1040 or 1040-SR (that is, the excess of the tax-exempt interest received during the year over the amortized bond premium for the year). of interest income. A bond bought at a premium leads to a loss at maturity. I have a form 1099-INT that lists tax exempt interest on line 8 and bond premium on tax exempt bonds on line 13. SEE BLOW: If the bond yields tax-exempt interest, you must amortize the premium. If a regu-lated investment company (RIC) within the meaning of section 851 has excess bond premium for an accrual periodThis amortized amount is not deductible in determining taxable income [*]. The interest income from taxable bonds is subject to federal, state (and local, if applicable) income taxes. You are required to report tax-exempt income on Form 1040, and may be required to report it. There is also $12,343 of bond premium on tax exempt bonds on line 13. 11-Bond premium (covered lots) 0. I would, however, use D4 for what's reported in Box 13 for covered securities and reserve E (T) for noncovered securities where amortization would have to be computed offline. (C) Carryforward in holder's final accrual period —( 1) If there is a bond premium carryforward determined under § 1. 07. If there's an amount in box 8. 10. If boxes 8 and 11 are blank. CT modifies federal AGI by adding tax exempt interest to federal AGI. Except as provided in paragraph (c)(3) of this section, a taxable bond is any bond other than a tax-exempt obligation. Municipal bonds have a face value. If only two of the three agencies rate. In Box 88 - State, enter XX. 12-06-2019 04:38 PM. If you are required to file a return, a negligence penalty or other. Despite being shown as (ii) Amount of bond premium. S Treasury Obligations. Acq. In line 16 - (11) Bond premium, enter the amount. I net purchased accrued interest (purchased interest) and box 13 on 1099 INT (Bond Premium on TEB) against total Tax Exempt Interest (Box 8 on 1099 INT). First, the code declares that the amortizable bond premium deduction cannot be taken for tax-exempt bonds. Below this subtotal, print “ABP Adjustment,” and the total interest you received. You file Form 8888 with your tax return and complete Part 2 to. Select I need to adjust the taxable amount, select Continue. Marietta, GA 30060. In box 11, Bond Premium, put the amount. For further guidance, see § 1. 67. 1099-OID - THIS FORM WAS CHANGED FROM AN AGGREGATE FORM FOR A CUSIP TO A FORM FOR EACH TAX LOT: • Two new boxes were added: market discount and acquisition premium. For a tax-exempt covered security acquired at a premium, box 13 shows the amount of bond premium amortization allocable to the interest paid during the tax year. That means: RISE's gains are taxed differently. I can't do a manual adjustment as I'm doing a standard deduction, not itemized deduction. You can do the following steps to enter your 1099-OID in TurboTax: Jump to. It usually occurs when companies issue bonds at a price less than their redemption value at maturity. Is the tax-exempt OID on the federal level reported on the tax. The discount is also amortized and increases the amount of t/e. U. Bond premium- Tax-exempt obligations (noncovered lots) 0. You must also enter the letter E in the NAEOB column and the exempt amount in the NAEOB Amount column. It should show 6,000 = 10,000 - 2,000 - 2,000. I have a form 1099-INT that lists tax exempt interest on line 8 and bond premium on tax exempt bonds on line 13. 000% Dated Date: 8/31/20 Maturity Date: 4/01/27 Issue Yield/Price: 0. Click Start or Update next to Interest on 1099-INT. 205 Lawrence Street. My interest income is $0. However, if the. Specified Private Activity Bond Interest — Shows tax-exempt interest subject to the alternative minimum tax. §12-701(a)(10)(A)(vi) and (vii), any interest on indebtedness incurred or continued to purchase or carry obligations or securities, the interest on which is exempt from Connecticut income tax, and the amortizable bond premium for the taxable year on any bonds or obligations, the interest. Ultra Short Bond Fund - the Advisor has contractually agreed to waive management fees in an amount equal to an annual rate of 0. 1. In fine print is says "original cost basis $10,368". Bond premium on tax-exempt bond $ 14 . 33 of accrued interest you collected on the date of sale, for total tax-exempt interest income of $711. Under your last entry on line 1, put a subtotal of all interest listed on line 1. When sold for more of the face value, they are sold with a premium; when less than face value, a discount. Vanguard Tax-Exempt Bond Index (VTEB) Annual fee: 0. 51%, while the premium version (FZEXX) has a seven-day yield of 2. In TaxSlayer Pro, tax-exempt interest and dividend income can be entered from two different menus within Form 1041. 00 Market discount (noncovered lots) 0. (ii) Amount of bond premium. 1099-INT. The closing date of a tax-exempt bond issue usually is the culmination of weeks or months of negotiation and planning. Maintains a dollar-weighted average maturity of 1 to 2 years. Below this subtotal, print “ABP Adjustment,” and the total interest you received. Box 11. One section of the tax rules pertaining to hedge bonds provides that to avoid a bond becoming a hedge bond, an issuer must. 1-2022). A tax term, the amortizable bond premium refers to the excess price (the premium) paid for a bond, over and above its face value. Bond premiums on tax exempt are not adjusted at the federal level. In eras of slimmer returns, taxes take on added importance to portfolio performance. With a shorter-term bond, the risk premium is not as great. Report the bond’s interest on Schedule B (Form 1040A or 1040), line 1. ”. • Qualified hospital bonds. 10. Under Wages & Income select Interest on 1099-INT. That percentage varies from year to year. They also won’t incur a capital loss at maturity since the premium. withholding. A. (iii) Bond issuance. What should I enter in the Type Code field in the interest and dividends statements? How do I enter income from a private activity bond? How do I enter income that is tax-exempt at the federal level, but taxable at the state level?Therefore: Accrued OID at time of Sale = 6 /10 × $200 = $120. Tax-exempt income. savings bonds. Please note tax-exempt income dividends paid by the tax-free ETFs are exempt from Federal Income Tax and will be reported on Form 1099-DIV. (March 27, 2023) As part of ongoing efforts to improve service for the tax-advantaged bond community, the IRS accepts electronic filing of Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds. 6045-1(n)(5) that you did not want to amortize the premium under section 171, or for a tax-exempt covered security acquired at a premium, your payer mayThe adjustment will reduce your amount of reportable tax-exempt interest on Form 1040, line 8b. Tax-exempt bond. (March 27, 2023) As part of ongoing efforts to improve service for the tax-advantaged bond community, the IRS accepts electronic filing of Form 8038-CP, Return for Credit. e. 8 billion Vanguard Tax-Exempt. Information about tax-advantaged bonds, including tax-exempt, tax credit and direct pay bonds. (However, see Tax-Exempt Bonds and Coupons, later. If a net amount of interest appears in box 8 or 9, whichever is applicable, box 13 will be blank. ) The federal tax laws allow DED to allocate an annual amount established by formula in tax-exempt bond authority for industrial development, first-time farmers, student. So if you did report it, it would be on Schedule B (which the Sch B totals carry over to the front page of the 1040). I have a form 1099-INT that lists tax exempt interest on line 8 and bond premium on tax exempt bonds on line 13. The TIC for the most recent tax-exempt bond sale on June 8, 2022, was. Level 7. Form 1099-OID, Original Issue Discount, exists to report income when bonds, notes, or certificates of deposit (CDs) are sold at a discount from their maturity value. tax-exempt interest received during the year over the amortized bond premium for the year). • Nongovernmental output property bonds. You must enter the ordinary dividends on box 1a and qualified dividends on box 1b. During the life of the bond, the premium amount is amortized and reduces the amount of t/e interest income received. A premium bond is one in which the market price of the bond is higher than the face value. In accordance with IRS-mandated changes, there are several modifications to Form 1099-INT, including: • Line 11 now reflects total bond premium for taxable covered lots; there. The amount is used to reduce the amount of tax-exempt interest reported on line 8b, Form 1040, and also reduces the taxpayer's basis in the bond. The difference between these two amounts is the OID. itonewbie. Personal Income Tax Massachusetts General Laws exempts from income taxation interest on obligations of the Commonwealth of Massachusetts, its political subdivisions, and agencies or instrumentalities of the Commonwealth and its subdivisions. A NY resident with NY income in excess of $1,000,000 purchases a 5-year $100,000 Washington state tax-exempt bond with a 3% coupon for $105,000 since market conditions dictate a 2% yield on this bond. Changes to guidance, law and procedures that affect Tax-Exempt Bonds. Straight line or constant yield. 1 A closing binder and/or CD or other electronic copy of relevant and customary transaction documents is saved and stored properly. A holder may elect to amortize bond premium on a taxable bond. – Issuer may have an option to issue tax exempt bonds or not. In Box 110 - Additional amount, right-click on the box and select List . Learn more about mutual funds at fidelity. Instead the amortization amount is just showing in the 1099 in the. Reporting bond premium amortization for noncovered tax-exempt municipal bonds. -or-. Tax Exempt Bonds. Fidelity Government Money Market Fund (SPAXX) 0. 1041-US: Interest, dividends, and tax-exempt income FAQs. Under Wages & Income select I nterest on 1099-INT. The bond pays out interest, but loses $368 of value during the holding period. 03-06-2023, 09:01 PM. State tax withheld $ $ 2021. You choose to use annual accrual periods ending on February 1 of each year. 171–1, the amount of bond premium is $10,000 ($110,000−$100,000). 00. See § 1. 50 with respect to bonds G and H. Analyze the Fund American Funds Short-Term Tax-Exempt Bond Fund ® Class F-1 having Symbol FSTTX for type mutual-funds and perform research on other mutual funds. If there is an amount in both boxes 2 and 8, the amount in box 2 is interest on a U. The firm will publicly name Lee Chu as a portfolio manager at. TTB, Pub 17 & Pub 550 seem to say the Acquisition premium of a tax exempt bond must be amortized - but how is this done? tax-exempt bonds and, if a tax-exempt OID bond purchased at the issue price in the initial offering is held to maturity, any OID associated with the bond would be treated as tax-exempt interest. For each year that the premium is amortized, Janice’s cost basis (the $1,030) is reduced by the annual $10 amortization under IRC § 1016 (a) (5) and reflected by the broker as well under Treas. municipal bonds from federal income tax. Error: Schedule M1M - sum of line 1 & line 2 doesn't match Form 1040 line 2a. What are the benefits of tax-exempt bonds? Interest rates on tax-exempt bonds are considerably lower than interest rates on comparable taxable obligations. How to report acquisition premium on tax exempt bonds. The fund trades on the New York Stock Exchange and comes attached with a 0. 00 8- Cash liquidation distributions 0. Municipal Bond Acquisition Premium. 00 10- Exempt-interest dividends (includes line 11) 0. 00 Tax-exempt private activity obligations (AMT, covered lots) 0. Both will achieve the same result. However, each year you must reduce your basis in the bond (and tax-exempt interest otherwise reportable on Form 1040, line 8b) by the amortization for the year. Depending on the type of bond, the premium can be tax deductible and amortized. Municipal bonds. The fund has an expense ratio of 0. The bond’s maturity period is 10 years, and the face value is $20,000. If the bond yields tax-exempt interest, you must amortize the premium. There is also an adjustment to tax-exempt interest that does not factor into the income distribution deduction. amount of the amortized bond premium pursuant to IRC § 1016(a)(5). Lesson 4 also discusses the rules for depreciation of tax-exempt bond financed property set forth § 168 and the rule under § 57(a)(5) that requires individuals and corporations to include tax-exempt interest from “specified private activity bonds” in income for purposes of figuring the alternative minimum tax. Two provisions of the code eliminate this windfall. The Vanguard Municipal Money Market Fund (VMSXX) has a seven-day yield of. Box 14: Tax-exempt and tax credit bond CUSIP. Hello again. 1272-2(a):To report this on your tax return, you can follow these steps: Enter the Tax Exempt OID ($3700) on Form 1040, Line 2a as tax-exempt interest. 171–2(c) Example 4. 73. Reg. 00 14-Tax-exempt and tax credit bond CUSIP number ORIGINAL ISSUE DISCOUNT AND. 17 . 171–2, if a bond premium election were in effect for the prior taxable years, C would have amortized $3,257. 3% tax-equivalent yield, would offer inflation-beating returns every year—right up until. Vanguard Short-Term Tax. Most interest that you either receive or is credited to an account that you can withdraw without penalty is taxable income in the year it becomes available to you. The true interest cost (TIC) for the sale’s tax-exempt bonds is 2. with adjustments proper to reflect unamortized bond premium, with respect to the bond, for the period before the date as of which subsection (a) becomes applicable with respect to the taxpayer with respect to such bond. These premiums are large: the average ten-year bond was issued at a price of 119 per 100 face value. Because individual bonds and bond funds distribute income differently and treat your principal differently, there are also some differences in how that income and any capital gains are taxed. on my 1099-Int: Box 8 Tax-Exempt Interest: $544. including tax-exempt muni bond interest, is between $32,000 and. 4- Federal income tax withheld 0. 1. that are exempt from income tax providing these amounts are included in your Illinois base income. • All other tax-exempt private activity bonds. In the next page, - enter the NON-covered premium amount as a positive number, and. Panama Canal Zone Bonds (exempt under 31 U. From the left of the screen, select Income and choose Interest Income (1099-INT, 1099-OID) . following rules shall apply to the amortizable bond premium (determined under subsection (b)) on the bond: (1) Taxable bonds. Subtract the bond premium amortization from your interest income from these bonds. For purposes of preparing the state (Calif) return I should be able to reduce the interest income on the out of state bonds by the amortized bond premium attributable to such bonds. The $20,000 of interest income on United States bonds is to be subtracted from Federal adjusted gross income (see section 112. See the instructions above for a tax-exempt covered security acquired at a premium. Below this subtotal, print “ABP Adjustment,” and the total interest you received. C.