Is the US Government Interest such as from a savings bond that you redeemed, e.g., a Series EE Savings Bond and it is reported as Dividends? If so:
- Enter your Form 1099-DIV exactly as the boxes appear in the 1099-DIV section including exempt-interest dividends.
- Click Continue
- At the screen "Tell us if any of these uncommon situations apply to you", check the box next to "A portion of these dividends is U.S. Government interest". Click Continue.
- The next screen states "Enter U.S. Government Interest". Enter the amount in the box provided. Click Continue.
- The next screen asks which state(s) your exempt-interest dividends are from. You can enter the amount for each state here. Click Done.
The Learn More link in one of these steps explains:
The U.S. government taxes income you receive on its own bonds. Your state does NOT tax income from U.S. government bonds, but each state defines government bonds differently. You should check to see if any part of these dividends is taxable in your state. This information is usually included with the 1099 you received from your broker. You may also be able to get this information from your mutual fund company's website.
Based on this information, enter an adjustment for the amount your state does NOT tax, and the TurboTax State program will subtract this amount from your state income.
Interest income from Treasury bills, notes, and bonds is subject to federal income tax, but is exempt from all state and local income taxes. See this IRS webpage for more information.
When you lived in more than one state during the tax year, you should prepare the earlier nonresident/part-year resident state return first and then the return for the state where you lived at the end of the year, to get correct results. If you prepared them in the wrong order, you can delete them and start again.
Different states treat the income allocation calculation differently. Complete the TurboTax interview for the earlier state, and make the correct interest income adjustment where prompted. When that return is complete, then complete the state interview for the later state.
See this TurboTax help article for more information about splitting income between states.
I will update my response to your similar question in another thread. I had initially thought this was reported on a 1099-INT. I apologize for any inconvenience.
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