I assume you are an Arizona resident. Municipal bond interest is, in general, exempt from federal tax, but must be reported in a box on your return. You would enter this under the Federal Income Interest section under the 1099-INT area. There you would provide the amount of municipal bond interest (Box 8), whether directly from a bond you owned or from a municipal bond fund in which you own shares, and as you continue, TurboTax will ask you to supply its origin state or states. In your case, I suspect you own shares in a municipal bond fund, in which case you will either need to look at the fund's website or, if you are lucky, an enclosure with your 1099-INT to determine what percent of that federal tax-exempt interest arose from Arizona municipal bonds. To paraphrase the TT help:
Example: You lived in Arizona and received $1,000 interest from the ABC tax-exempt bond fund.
- Select Arizona from the drop-down list and enter the $60 of interest received from Arizona.
- Then select More Than One State and enter the balance of $940.
