In the Federal section, it goes in at two possible places....that get transferred to the state forms as needed.
1) if you hold individual US bonds or saving bonds...those interest $$ must be reported in box 3 of a 1099-INT form. Only the box 3 $$ should get transferred to IN forms for an income reduction. (Box 8 is used only for individual Municipal bonds you may own that distributed $$. )
2) If you hold bond funds thru a brokerage or Mutual Fund company....all $ distributed from those funds are reported on a 1099-DIV form . All dividends from stocks and bonds that are Federally taxable sources are listed as a total in box 1a. IF 1a includes an US bond interest, you need to calculate what the sub-part is based on the information the Fund Company provides each year. Then, on one of the pages just after the main 1099-DIV software form, you check a box:
"A portion of these dividends is US government interest". which refers only to a sub-part of the box 1a value.....then a few pages later you get a box to enter your calculation of how many $$ that is....and that is the $ amount that should get transferred to IN forms for an income reduction.
IF you also have some box 11 $$ on the 1099-DIV form, those $$ only represent Municipal Bond interest from all the state bonds the Mutual fund owns...no US bond interest is included.
____________*Answers are correct to the best of my knowledge when posted, but should not be considered to be legal or official tax advice.*
