Taxability of US bonds accrued market discount in Connecticut and New York

Depends who you ask... and if this is significant for your situation you may need to seek a CPA expert in your state tax code.  There's a general argument made on the internets that the AMD is being paid from the secondary market not the US Treasury directly so it doesn't qualify for state exemption (tho this ignores some of the market discount may comprise OID which would be coming from US Treasury); vs. arguments to the contrary based on how a particular state tax code is actually written - definitions of interest vs. "income derived from" etc, some states like NJ exempt gains on US Treasuries as well as interest which implies AMD is exempt in NJ, whereas North Carolina explicitly settled in court that AMD is taxable there, etc.

This other thread has some other discussion and links to more threads (of many on here) including some specifically on NY

https://ttlc.intuit.com/community/state-taxes/discussion/re-accrued-market-discount-on-us-treasuries...

TT doesn't support this issue at all, there is nowhere to designate the AMD flipped to Schedule B as being a US Treasury Obligation for state tax purposes.  In terms of solutions if seeking exemption the general solution is to make some manual adjustment to state tax which I believe most state programs provide in some fashion, tho folks have reported this causes issues with e-file in NY.  There is an alternative option someone proposed using a 1099-DIV US Gov Obligations amount (without Box 1 - TT seems to allow this) tho I'm not sure any ramifications of this but it was interesting, see the thread above for more info on this.  Another option is to file manually.

Not a CPA/Expert so just my 2 cents on this and context on this thorny topic, hope this helps.