Why is bank interest income entered in NJ-1040 16b Tax-exempt column instead of 16a Taxable column?

When you say bank interest, is it interest on a savings account or something else? It would not be taxable if it falls into one of the categories below.

The following items of income are not subject to New Jersey tax. However, if you file a resident return, you must report the total amount of nontaxable interest on the "Tax exempt interest" Line of your return:

• The portion of a distribution from a New Jersey Qualified Investment Funds; and
• Interest and capital gains from obligations of the State of New Jersey or any of its political subdivisions or from direct federal obligations, such as U.S. Savings Bonds and U.S. Treasury Bills, Bonds, and Notes.

For more information on exempt (nontaxable) income, see the section on income in the tax return instructions.

More information about exempt obligations is available in Tax Topic Bulletin GIT-5, Exempt Obligations.

Hi. It is interest income from savings and CD accounts. I believed this taxable in NJ. 

I am going to assume this is box 1 interest and it would be taxable to NJ. Please review where you entered the interest income in the federal section. Under Tell us if any uncommon situations apply, verify there is no state box checked - no adjustments for the state.

Review your NJ income section as well to verify no changes there.

Reference: NJ instructions

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Thanks