State tax filing
Unlike other states, New Jersey does not begin with your federal adjusted gross income as a stating point of their calculation of state taxable income. Therefore, it is not shown as a deduction to income. Instead, the NJ-1040 lists out all of your income and the tax exempt income is shown on Line 16b. This amount is not taxed and the interest and dividend income worksheet attached to the return also shows the amount of tax-exempt interest income, under Interest Summary - Line 2.
In the mock return I completed to test the flow of data, I inputted a 1099-INT with $5,000 in Box 3. There was no additional information I had to input on any NJ screen. It automatically flowed to the correct lines.
NJ-1040
Interest & Dividend Worksheet
