Choose the state where your tax-exempt dividends came from?

Is this my state? Or the state of the financial institution?

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Neither; it wants the state (or states) that the debt whose interest generated the tax-exempt dividends came from. (For example, if it came from Chicago city bonds, enter Illinois no matter where you live OR where the fund is based.) That information is usually either on your 1099-DIV or the paperwork that came with it. TurboTax needs that because many states only exempt interest & dividends from their OWN state or local debt, and tax similar debt from other states.