In 2019, Uriah received the following interest payments: Interest of $300 on an overpayment of 2018 Federal income taxes
Interest of $400 from his bank certificate of deposit.
Interest of $1,000 on municipal bonds
Interest of $1,500 on US savings bonds (Series HH)
What amount, if any, should Uriah report as taxable interest income on his 2019 individual income tax return?
A)$0
B)$700
C)$2,200
D)$3,200
E)None of these

Question

Quizplus · Accepted Answer

Uriah should report $2,200 as taxable interest income on his 2019 individual income tax return. The interest from municipal bonds and US savings bonds are generally exempt from federal income tax, but they may be subject to state and local taxes. The interest from the overpayment of 2018 Federal income taxes and the bank certificate of deposit are both taxable. Therefore, $300 + $400 + $1,000 + $1,500 = $3,200 in total interest income, but $1,000 + $1,500 = $2,500 of it is not taxable. So, the taxable interest income is $3,200 − $2,500 = $700.

In 2019, Uriah Received the Following Interest Payments: Interest of $300