Support Center

<- Back to Main Page

1099INT (Worksheet): Entering tax-exempt municipal bonds increases amount of tax

---

While municipal bonds are exempt from Federal income tax, they may affect other items which can cause the amount of tax to increase.

 

Two items that may be affected by tax-exempt interest are the taxable amount of Social Security benefits, and the earned income credit (EIC). Tax-exempt interest may cause the amount of taxable Social Security benefits to increase. Tax-exempt interest may eliminate theEIC by causing the amount of investment income to exceed the allowed limit.

 

In both cases, the addition of municipal bonds to a return may cause the tax to increase, but municipal bonds are not directly included in the taxable income.

Tags: federal,form