On a state income tax return, how do I report the portion of mutual fund dividends coming from US Government bonds so they are exempt from state income tax?

[sbigwood]

I found the answer.  I was able to input the data on the Federal return, and after much searching on the Maryland return, I found that the dividends from US Government Bonds were aggregated and presented on MD Form 502SU Subtractions from Income) as a subtraction from taxable income.  The total shows up on page 2 on line ab:  Income from U.S. Government Obligations.  The ProSeries software had suggested when I input it on the Federal return that I might need to also enter it manually on the State return, but that was not the case in Maryland.

[Accountant-Man · Accepted solution]

When you double-click on the federal input for Sch B line for the fund, it takes you a second page, which has a line for US govt interest. That amount is subtracted from the federal taxable dividends to arrive at state taxable dividends.