@bbjaspan @NYLou
In my opinion, when you buy a US Government Bond or other obligation at a discount on the secondary market, the interest income attributable to that discount is not interest paid by the federal government. Therefore, it is not deductible on your state tax return as interest paid by the US Government. If you want to deduct it on your Georgia tax return, you can do so:
- Open the Georgia State tax section of your return.
- On the screen with "Here's the income that Georgia handles differently" scroll down and click Start next to "Other Subtractions from Georgia Income"
- Enter a description and the amount.
Many states, New York included, have a similar option to enter an adjustment as "Other". Some states, like Michigan only have specific adjustments so you can't reduce your state income for interest reported as taxable.
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