I would need to know what state you are dealing with to be more specific. But the taxation of railroad retirment sickness benefits would vary from state to state. If it is not taxable in your state, you should see an option either when working through your state return or after you entered the income on the federal return to indicate that it is not taxable in your state. If you can clarify please what state you are working on we can be more specific on how you may be able to exempt the income from taxation.
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