the rub is the definitions of "interest" and "gain" (referred to as "gain/loss on sale") which needs to be looked at with the rest of the state tax code; I've seen arguments elsewhere for states that explicitly state they are following Fed definitions for income, then in this case the AMD is reported as interest on Fed 1040 not a gain, so is it exempt based on this list. etc.
As to the 'how' the only way to handle it I've seen on the many threads on this topic, is to put in a manual subtraction with explanation, I assume all state programs allow for this.
Separating Fed and State in TT sounds messy - technically on desktop you could save a different version to submit to state, maybe manually rather than e-file. But you need to submit your 1040 and schedules to the state and the Schedule D would look different for a start. Ugh, feels like having inconsistencies is a recipe for more issues than being up front with a manual adjustment if confident in the exemption.
Not a CPA/Expert - just my 2 cents on this long-running topic.
