You enter it on the federal return.
When you enter the 1099-INT into TurboTax on the federal return, there is a box that reads "Box 3 - Interest on U.S. Savings Bonds and Treas. obligations".
Any amount put in here is added to "Virginia Subtractions" on the VA return, so the interest on U.S. Savings Bonds is automatically removed from VA taxable income.
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