LenaH
Employee Tax Expert

State tax filing

It is not prompting you to enter income exempt or excluded from gross income. It is prompting you to enter expenses allocable to income exempt or excluded from gross income. In other words, if an income source is exempt from NC tax, then the state does not want any deductions relating to that exempt income to be deducted (in addition to the income being exempt). Therefore, you'd have to add those deductions back when calculating your taxable income.

 

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