All federal agency bond interests (Federal Farm Credit Bank, Federal Home Loan Bank) are not subject to state income tax.
Now the issue is: where/what is the appropriate ways to enter the data:
For Pennsylvania, I can go directly to "Interest Income Worksheet", there is a column called "Adjustment Amount", I can simply enter the total of Agency Bond payment, then, for the "Adjust Type", I use "M" - which says "State Use Only". This way, it successfully deduct the Agency Bond amount. However, I am not sure if "M" is the right choice since it says "State Use Only" -- does it mean it is reserved for PA State official use?
The other choice includes "H" - which means Other Adjustment. However, choosing "H" does not give me the full deduction of the agency bond payment (only gives me, like, 90%).
Please advise. Many thanks.
