First, what state?
Second, why is the pension exempt in your state?
Third, it often happens that in the screens after you enter the 1099-R data, that there are one or more screens that asked what the source of the pension is. For most states, this is how TurboTax knows that the pension is not taxable.
That is, it's not in the state interview but in the federal interview where you enter this state-specific stuff...go back and check the 1099-R interview.
If that doesn't cover your question, come back and tell us.
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