If your interest is exempt from New Jersey only:
The amount you enter will be added to the total interest income on the federal return, and will be included on New Jersey Form NJ-1040, Line 16a or Form NJ-1040NR, Line 16.
If the interest is exempt from Federal Only OR Federal AND New Jersey:
You have $2,000 dollars of total interest, with $1,000 being federally exempt and $300 being New Jersey exempt. Enter $1,000 in Box 1 of Form 1099-INT. The $1,000 that is federally exempt is entered in Box 8. The $300 that is exempt from New Jersey taxes is entered in the Amount from Box 8 that is both Federal and State exempt interest field.
In this example, the following interest income would be reported on the federal and New Jersey returns: