Part two is how to enter it in your state form if you decide to take the exemption. From what I have been reading it is trickier in TurboTax than I would have thought (have not confirmed anything below myself yet).
Regarding TurboTax NY state IT-201, I have read that you CANNOT manually override the entry for Line 28 "U.S. Interest on US government bonds," because doing so prevents you from being able to file your return electronically.
There MAY be a way to trick this in there, but it would not accommodate everyone and would be much better to have a right way to do it.
It could also be entered on line 31, but that doesn't seem like the most appropriate place for it and may present other issues.
