Where to enter Virginia State income tax subtraction for "the amount of any income (interest, dividends and gain) from obligations of the U.S. that are included in your federal adjusted gross income, but are exempt from Virginia state tax"?

[sjabrams]

The amount of any income (interest, dividends and gain) from obligations of the U.S. that are included in your federal adjusted gross income, but are exempt from Virginia state tax, should be subtracted on line 4 of Schedule ADJ, and the total subtractions should be entered on Form 760 line 7, per the Form 760 instructions. I cannot find a place in the TurboTax Virginia taxes section to include this subtraction, and TurboTax won't let me enter it directly on Schedule ADJ. The section on income that Virginia handles differently includes "Exempt US Bond Income," but this refers to income from U.S. obligations that are not subject to federal tax and therefore must be added to Virginia income. Instead, I have dividends from the U.S. Treasury that are included in federal AGI and so should be subtracted. Where do I enter this?

[MelindaS1 · Accepted solution]

U.S. Interest dividends are entered in the 1099-DIV entry screens. (Don't worry, even if you didn't actually receive a form 1099-DIV for this income - it's reported here.) Follow these navigational steps in TurboTax Desktop:

Select Federal Taxes > Select Wages & Income > Scroll down to Interest and Dividends > Select Start next to Dividends on 1099-DIV > Select Skip Import > Select Type it in myself > Enter your dividend income details and select Continue until you see a page titled Do these uncommon situations apply? > Check the checkbox next to A portion of these dividends is U.S. Government interest. > Select Continue > Enter your U.S. amount on the following page

This will automatically be subtracted from your Virginia personal income tax return, which you can verify by switching to Forms > Virginia Individual

[sjabrams]

Thank you! I had imported the 1099-DIV, but the Direct Federal Obligations aren't included on the main 1099-DIV. They're in a separate section titled "State Reporting Information for Mutual Funds and Unit Trusts," which doesn't import. By following your instructions, I was able to get the subtraction on my Virginia tax return. Thanks again!