Federally tax-exempt interest income from obligation of other states is income that may be non-taxable on the federal return but subject to Virginia taxation.
If you received dividend or interest income from a mutual fund (regulated investment company), you may need to include all or a portion of the income on your Virginia tax return as taxable income.
The most common type of interest that is nontaxable on the federal return but taxable on the state returns is interest from state bonds. The interest should be included as an addition on the Virginia return (Resident, Nonresident or Part-Year Resident).
The addition to income entry is located under the:
- State
- Edit Resident Virginia Return
- Additions to Income
- Interest on obligations of Other States not taxable on the Federal return