US Bond income is taxable at federal level but not at the VA State level. Where do you enter the exempt US Bond interest to be deducted from income for the VA return?

[DaveF1006]

When you enter the 1099-INT into TurboTax on the federal return, there is a box that reads "Box 3 - Interest on U.S. Savings Bonds and Treas. obligations".

Any amount put in here is added to "Virginia Subtractions" on the VA return, so the interest on U.S. Savings Bonds is automatically removed from VA taxable income.

[baldietax]

Depends how you earned the US bond income...

If it was 1099-INT Box 3 (Treasury Note interest or T-Bills usually) it will flow automatically to your state return as a subtraction as DaveF says.  

Also if you had a MM fund which reported dividends in 1099-DIV Box1 there is an interview question after the 1099-DIV input screen whether any of it was US Gov interest and you enter the $ amount on the following screen, which will also flow to your state subtraction.  You have to derive that amount based on % of US Gov provided by the fund company as "supplemental tax information", or in your 1099 statement in some cases, multiplied by the dividend received from that fund.  Importing a 1099 does not figure this out you have to edit the 1099 and go thru the interview to make this adjustment.

You may also have 1099-OID Box 8 if you hold TIPS or STRIPS, that will also flow to state subtraction.

For all the above, check VA Form 760 line 7 or Schedule ADJ/CG line 4 for the total amount of subtraction is as you expect.

Lastly, If you held a discounted Treasury Note that reports "Accrued Market Discount" (the discount on the bond when you acquired it) as an adjustment to the gain/loss in Box 1f, TT will put that on your Schedule B as ordinary interest but it does not flow to state tax automatically.  But we can get into that further if it applies.