When you indicate that the income is not taxable in the federal portion of TurboTax, in the Form 1099-INT entry screens, there is no option to indicate the reason the income is not taxable on your Maryland return. However, the main reason it would not be taxable is because it was interest on Federal Obligations, so TurboTax seems to default to that choice. I am wondering if the interest is reported in box 1 in error on the form 1099-INT. You mention there is an entry in box 8, but that wouldn't be taxable on the federal return so it wouldn't need to be entered on the state form 502SU. So the interest subtraction on your state return must be from an entry in box 1. You indicated that it wasn't taxable on your state return, which would normaly mean it was interest on US obligations, and in that case form 502SU is correct.
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