Get your taxes done using TurboTax

It depends. I tested this in TurboTax software and it seemed to work just fine. I reported $2000 as tax-exempt income in Box 12, and then reported $500 interest earned in Massachusetts and then made another entry reporting $1500 earned in multiple states. 

After I recorded this, I went to Massachusetts state forms and looked at the  Int/Div Excl and $1500 was properly excluded here meaning that $500 was still recorded as reportable income in Massachusetts.  Here is the screenshot.