I encountered the same situation, they are not asking what State you lived in. The State you live in may or may not allow it to be tax free... You can look up your investment online and there should be a 2020 year end statement for it and it will provide details about all the States the Investment invested in and the percentage for each State the investments were in. In my case, I identified the percentage for CA where I live and calculated the amount of interest dividends from CA and then added a second line item for "More than one State" (it's the last item in the drop down menu) and assigned the rest of the interest dividends to that.
