Hello baldietax,
Thanks for your prompt and detailed response.
I am familiar with those restrictions with certain Government Agency Bonds, but in my case, these bonds were issued by Federal Farm Credit Banks Funding Corporation and Federal Home Loan Banks, so the interest income of both types of those bonds are state tax exempt. Furthermore, the details of those GSE bond interest payments and bond descriptions are buried in "Details of 1099-INT Transactions" (as part of my Consolidated 1099 Form), information which is NOT reported to the IRS.
So rather than updating my 1099-INT form (where GSE bond interest income is still accurate and taxable on my Federal 1040 tax forms), I chose to manually enter those tax-exempt interest income totals as an "Adjustment/Subtraction" to the applicable "Taxable Interest" line item in my state tax form. This appears to manually force the interest income to become state tax-exempt.
I only wish that TurboTax had the feature to prompt the tax filer with the ability to designate specific interest income from 1099-INT Box 1 (Interest Income) as state tax-exempt, much like Box 8 (Tax-exempt Interest). I will reach out to my broker as well to see if that tax-exempt designation can originate from them, since they are the source of those specific 1099-INT tax records.
