Municipal bond Amort Bond Prem - Pro-rata override?

[JimS_1]

I have a 1099 that shows me the full detail of muni bond income & amortizable bond premium (ABP) for both in-state and out of state muni bonds.

Lacerte is doing a pro-rata calculation for in-state ABP based on the total ABP entered on the line "Amortizable bond premium on tax-exempt bonds".  But it's not the same as the actual ABP for in-state that is shown on the 1099.

Is there a way to override the pro-rata calculation to use the actual ABP?

[itonewbie · Accepted solution]

Won't look pretty on the input screen but, if you must, adjust the In-state municipal bonds based on the ratio you want.

For example, out of $2,500 of muni bonds interest, $1,000 is in-state.  That means 60% would be taxable to the resident state.  Let's say the premium is $625.  That would result in tax exempt interest of $1,875 ($2,500 - $625).  Lacerte will take 60% of $1,875 (i.e. $1,125) as taxable income on the state return.

If you say that's not right because the premium for the in-state amount should really be $312.50 instead of $250 ($625 x 40%), you'll need to plug in a make-believe in-state muni bonds amount to yield the result you want.  In this case, you want the state taxable amount to be $1,187.50 (i.e. $1,875 - ($1,000 - $312.50)).  Since $1,187.50 is 63.33% of $1,875, you'd need to plug in $917 ($2,500 x (1 - $1,187.50 / $1,875)) on the line for In-state municipal bonds.

Lacerte will then compute the out-of-state taxable amount based on ($2,500 - $625) x (1 - $917 / $2,500) and yield $1,187.

[JimS_1]

Thanks @itonewbie!  As you say, it's not pretty, but it works!  Too bad there isn't a way in Lacerte to do it, but I understand that the ABP may not always be disclosed, so this is a good compromise.

I'm creating a spreadsheet to use for this and future years.  If I make any royalties off the spreadsheet, I'll be sure to send you a check!  😀

Much appreciated!

[itonewbie]

@JimS_1 Lol, I think this one is going to make me rich.  And I can retire from this business, finally!

Have a good one!