Are my ETF dividends exempt from California state income tax?

[cj5]

I have a few thousand dollars in 1099-DIV income from my holdings in the iShares TIPS Bond ETF (TIP). According to the iShares website, 100% of the ETF income is from U.S. Government Obligations. See the TIP entry in https://www.ishares.com/us/literature/tax-information/2022-ishares-us-government-source-income-infor...

I just want to confirm that I can exclude this income from my California state taxes. I know the process for doing this (check the box that indicates "A portion of these dividends is U.S. Goverment interest"). It's just that this is the first time I've gone down this path, and want to make sure I'm understanding it correctly, and that these dividends are indeed not taxed in Califonia.

[ThomasM125 · Accepted solution]

California does not tax interest earned on federal bonds as per the following from FTB Publication 1001 Supplemental Guidlines to California Adjstments, so the income should not be taxable on your California return:

Here is a link to the publication:  FTB Publication 1001

[cj5]

Thanks. However, one point of confusion with your reference is that it is in respect to interest, not dividends. The ETF pays out dividends that were reported on 1099-DIV, and the  FTB Publication 1001 makes no reference to dividends being exempt from California state income tax. So even though the dividends were derived 100% from the interest of "federal bonds", they are were paid to me as dividends, not as interest. Do they still qualify?

UPDATE: Never mind, I found the answer. The last part of the Taxable Interest Income section covers Exempt interest dividends (Mutual Funds), and says:

"California does not tax dividends paid by a fund attributable
to interest received from U.S. obligations or California state
or municipal obligations if at least 50% of the fund’s assets
would be exempt from California tax when held by an individual."

Although ETFs and not mutual funds, but it seems they would still be covered by this section.