In addition to the interest from muni-bonds being exempt from federal tax, they are exempt in the state that issued them. So if the funds you own, invested in bonds from your state, that portion of the interest is tax free for state tax purposes. Your year-end tax package from your broker will list the percentage of interest from each applicable state. Your state may be zero or a very small amount. The easiest way to handle this is to enter "More than one state" which is the last option in the list of states and territories.
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