When you sell a treasury security, on the 1099-B part of the gain is attributed to accrued market discount and part to capital gains. Turbotax correctly records the accrued market discount as interest on schedule B of the 1040.
However, when this is transferred to the state return (at least for CA), I can see no way to tell Turbotax that this is treasury interest and therefore exempt from state taxes. All I can see is to override TurboTax's calculations. Intuit support also could see no way to do this.
Am I missing something? It seems hard to believe that Intuit is incorrectly calculating state taxes for everyone who sells a treasury security.
Just to head off the typical responses: This is not a treasury interest payment from 1099-int or from a mutual fund on 1099-Div. This income is reported on 1099-B as accrued market discount (box 1f).
