If your interest is exempt from State ONLY, please follow these instructions:
The amount you enter in Box 3 will be added to the total interest income on the Federal return, but will not be included on the State return.
If the interest is exempt from Federal ONLY OR Federal AND State, please follow theses directions:
You have $2,000 dollars of total interest, with $1,000 federally exempt and $300 state exempt. Enter $1000 in Box 1 of the Form 1099-INT. The $1000 that is federally exempt would be entered in Box 8. The $300 that is exempt from state taxes would be entered in the field Amount from Box 8 that is both Federal and State exempt interest.
In this example, the following interest income would be reported on the Federal and State returns:
Form 1040, Line 8a = $1,000
Form 1040, Line 8b = $1,000
State return (line numbers differ) = $1,700