It sometimes has bugs...
...But usually (not always) it is the user who has improperly indicated what states the exempt interest came from.
You need to Edit every 1099-INT that has box 8 interest in it, and every 1099-DIV that has box 10 dividends in it.
On one of the pages that follows the main for, it asks what state those tax-exempt $$ came FROM. If you hold mutual funds, or a mixture of state's bonds, then you can answer "More than one state" and be done with it. (some people accidentally select their home state here, and that is usually wrong)
BUT....if you want to break out the $$ received from your own state's bonds, you have to check a box on that same page, and then calculate yourself how many $$ came from your own state (or any US territories, like Guam or Puerto Rico)...the rest is just left as "More than one state".
Example: You received $1000 of box 8 on a 1099-INT. You live in NC and he broker indicates that 2% came from NC. SO you break out $20 for NC, and $980 for "more than one state". That saved you $1 on your NC taxes Which taxes at 5% of the $20.
Whether it's worth the effort for you state depends on what your bond holdings are. A couple states have minimums, like CA, which only allows you to do this for individual CA bonds you own, or Mutual fund collections that hold more than 50% of assets as CA bonds.
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
