Get your taxes done using TurboTax
The agency bond may not be deductible to MA. You will need to determine the portion that is federal agency vs GSE to determine if any is deductible.
MA exempts interest according to TIR 89-8: Income Tax Treatment of Interest and Gains that is:
- backed by the full faith and credit of the United States; and
- it embodies a direct and binding promise by the Unites States to pay specified sums on specified dates.
An agency bond:
Debt issued by a government-sponsored enterprise (GSE) or a federal agency.
The key difference between a GSE and a federal agency is that a GSE’s obligations are not guaranteed by the government, whereas a federal agency’s debt is backed up by a government guarantee.
MA is state defined income and does not begin with the federal AGI like many states so you are able to exclude any allowed portion. It requires entries in the federal and state.
Federal
You would exclude it in the federal section immediately after entry of the 1099-INT. Select your state from the dropdown box.
State:
Interest and dividends section allows you to add or exclude amounts. You will need to exclude the amounts necessary regardless of the wording on the screen. The worksheets are not important but the tax return forms are. You want the forms correct.
For VA: Agency bonds are exempt. VA begins with the federal AGI. In the VA return, select subtractions and obligations of the US. See VA subtractions
