it depends on what box is entered on the 1099-INT. The correct entry would be in Box 2 of the 1099-INT. I tested this in my Turbo Tax online program and when I listed an amount in Box 2, the Minnesota AGI was reduced by the amount I entered.
in fact, You must pay federal income tax on federal bond interest, but you do not pay Minnesota income tax. the Federal Home Loan Bond is certainly a bond that is not taxable in the State of Minnesota.
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