I have Treasury bill interest that is exempt from state taxes. Why is turbo tax showing it as taxable income on my state return?

[cknyc]

Just dealt w this for New York State. Deleted from box 1 and entered in box 3. Federal tax did not change and NYS tax dropped appropriately.

Further note: appreciated the prior advice to click to add extra boxes, which got box 3 to show up.

Also: downloaded 1099 from Treasury Direct and it only had Box 1, so had to redo for TT. TT should fix this!

[KAB33]

I am having the same issue. I have deleted the 1099-INT and re-entered the interest for box 3.

In my VA state taxes we are complicated because we were part year residents (moved to DE) and the SAME thing appears to be happening. They just moved the income it seems over to the DE side (as income NOT earned in VA).

I don't see any line entry on the state return 760PY that shows a deduction from our FEDERAL adj income for the almost $42k in treasury interest.

Now I've paid for two state returns and I can't seem to find where there this deduction was given. 

[ThomasM125]

When you review the income portion of the Virginia return, you should see a screen that says Here's the income that Virginia handles differently, and you need to choose the option under investments that says Exempt US Bond Income:

On the next screen you can enter the amount of interest to be excluded:

You will see the subtraction on your state tax summary:

@KAB33