Same-Sex Joint Filers

Impact of The Federal Defense of Marriage Act (DOMA) – Tax Years Prior to 2013:
The terms "marriage" and "spouse" differed in meaning between Massachusetts and federal law. The Federal Defense of Marriage Act (DOMA) stated that the word "marriage" meant only a legal union between one man and one woman as husband and wife, and the word "spouse" referred only to a person of the opposite sex who was a husband or a wife. Since federal law did not recognize same-sex civil marriage, same-sex spouses remained as individual filers for federal purposes.

Where elements of Massachusetts taxation derived from federal law, such as the definition of gross income, or state deductions based on a federal counterpart, same-sex spouses had to perform special calculations to arrive at the proper Massachusetts tax figure.

Special Calculations to Arrive at the Proper Massachusetts Tax:
For deductions such as alimony payments, moving expenses, medical exemption, etc., same-sex joint filers had to combine the amounts from their federal returns (pro-forma 1040) to arrive at the amount to be reported on the Massachusetts joint return.


Section 179 Expense

For tax years beginning on or after January 1, 1998, to the extent a taxpayer was allowed to deduct trade or business expenses in Massachusetts, the Massachusetts deduction was the same as the federal deduction. Below is a table showing the allowable I.R.C. § 179 expense amount for business equipment placed in service during:

YearBase AmountMaximum Deduction with InflationInvestment LimitMaximum Investment Limit with Inflation
2011$500,000$500,000$2,000,000$2,000,000
2010$500,000$500,000$2,000,000$2,000,000

2009

$250,000

$250,000

$800,000

$800,000

2008

$250,000

$250,000

$800,000

$800,000

2007

$125,000

$125,000

$500,00

$500,00

2006

$100,000

$108,000

$400,000

$430,000

2005

$100,000

$105,000

$400,000

$420,000

2004

$100,000

$102,000

$400,000

$410,000

2003

$100,000

$100,000

$400,000

$400,000

2002

$24,000

$24,000

$200,000

$200,000

2001

$24,000

$24,000

$200,000

$200,000

2000

$20,000

$20,000

$200,000

$200,000

1999

$19,000

$19,000

$200,000

$200,000

1998

$18,500

$18,500

$200,000

$200,000

The Small Business Jobs Action Act of 2010: (P.L. 111-240):
Effective for tax years beginning in 2010 and 2011, the I.R.C § 179 election to expense property in its initial year had increased from $250,000 to $500,000. The I.R.C. § 179 overall investment phase-out threshold had also increased from $800,000 to $2,000,000. Further, the act allowed up to $250,000 of specified "qualified real property" to qualify for the expense election in 2010 and 2011. Massachusetts adopted these changes because I.R.C. § 179 is a trade or business expense deduction; these deductions are adopted by Massachusetts on a current Code basis.

For tax years 2003 through 2010, a taxpayer could make, revoke or change (without permission) an election on an amended return filed during the period prescribed for filing an amended return (i.e., generally, three years from the filing of the original return). 

Before the enactment of the Small Business and Work Opportunity Tax Act of 2007, the inflation schedule was as follows:

  • 2007 would have been $112,000 and $450,000
  • 2008 would have been $128,000 and $510,000
  • 2009 would have been $133,000 and $530,000
  • 2010 would have been $134,000 and $530,000

The Federal American Recovery and Reinvestment Act of 2009 (P.L. 111-5 or "ARRA"):
Effective for tax year beginning on or after January 1, 2009, the I.R.C. § 179 election to expense property amount in its initial year had been extended and remained at $250,000. The I.R.C. § 179 overall investment phase-out-threshold amount also had been extended and remained to $800,000.

The Economic Stimulus Act of 2008 (P.L. 110-185):
Effective for the tax year beginning on or after January 1, 2008 and ending on or before December 31, 2008, the I.R.C. § 179 election to expense property in its initial year had temporarily increased from $125,000 to $250,000. The I.R.C. § 179 overall investment phase-out-threshold had also temporarily increased from $500,000 to $800,000. Massachusetts adopted the increases in this expensing provision since I.R.C. § 179 is a trade or business expense adopted by Massachusetts on a current Code basis.

Small Business and Work Opportunity Tax Act of 2007 (P. L. 110-28):
Effective for tax years beginning on or after January 1, 2007, the I.R.C. § 179 election to expense property in its initial year had increased from $108,000 ($100,000 base + $8,000 inflation adjustment) to $125,000 and had been extended through 2010. The I.R.C. § 179 overall investment phase-out-threshold had also increased from $430,000 ($400,000 base + $30,000 inflation adjustment.) to $500,000. These amounts were scheduled to be adjusted for inflation annually. Massachusetts adopted the increases in this expensing provision since I.R.C. § 179 is a trade or business expense adopted by Massachusetts on a current Code basis.

American Jobs Creation Act of 2004 (P.L. 108-357):
Effective for years beginning on or after January 1, 2006, the I.R.C. § 179 election to expense property in its initial year had increased from $105,000 ($100,000 base + $5,000 inflation adjustment) to $108,000 ($100,000 base + $8,000 inflation adjustment.) The I.R.C. § 179 overall investment phase-out-threshold has also increased from $420,000 ($400,000 base + $20,000 inflation adjustment) to $430,000 ($400,000 base + $30,000 inflation adjustment.) The inflation adjustment in I.R.C. § 179(b) was set to expire after 2005 but has been extended by the American Jobs Creation Act of 2004. Massachusetts adopts the increases in this expensing provision since I.R.C. § 179 is a trade or business expense adopted by Massachusetts on a current Code basis.

Prior to the Small Business and Work Opportunity Tax Act of 2007 :
Effective for tax years beginning on or after January 1, 2003, the I.R.C. § 179 election to expense property in its initial year had increased from $24,000 to $100,000 and had been extended through 2009. The I.R.C. § 179 overall investment phase-out-threshold had also increased from $200,000 to $400,000. These amounts were scheduled to be adjusted for inflation annually. Massachusetts adopted the increases in this expensing provision since I.R.C. § 179 is a trade or business expense adopted by Massachusetts on a current Code basis.

Prior to 1998:
For federal tax purposes, the maximum I.R.C. § 179 expensing allowance had gradually increased from $10,000 to $18,000; for Massachusetts purposes, however, based on the Code of January 1, 1988, the maximum I.R.C. § 179 expense allowance was $10,000.


Certain Qualified (Miscellaneous) Schedule Y Deductions

Prior to 2005:

  • The deduction for Clean-Fuel Vehicles and Certain Refueling Property was due to expire since Massachusetts previously used the Code as amended and in effect on January 1, 1998, and the extension on this deduction was not incorporated into the Code of January 1, 1988.
  • The deduction for Business Expenses of National Guard and Reserve Members was not allowed since Massachusetts previously used the Code as amended and in effect on January 1, 1998, and this federal deduction was not incorporated into the Code of January 1, 1988.
  • Deduction of Overnight Travel Expenses of National Guard and Reserve Members in Connection with Their Services:
    The federal Military Family Relief Act of 2003 (Public Law 108-121), enacted November 11, 2003 provided an above-the-line deduction for unreimbursed overnight travel, meals, and lodging expenses of National Guard and Reserve members who must travel more than 100 miles from home and stay overnight in connection with such services. These provisions were effective for amounts paid or incurred in taxable years beginning on or after January 1, 2003.

    For Tax Years 2003 and 2004, Massachusetts Did Not Adopt the Deduction for Overnight Travel Expenses of National Guard and Reserve Members. The Massachusetts employee business expenses deduction was limited to those deductions allowed by Part VI of the Internal Revenue Code Section 62(a)(2)(A) as amended and in effect on January 1, 1998.

    Since the deduction for overnight travel expenses of National Guard and Reserve members at IRC Section 162(p) was not added to the Code until November 11, 2003, it was not allowable as a deduction for Massachusetts purposes.

Prior to 1998:
All of the deductions listed above were not allowed in Massachusetts.


Charitable Contributions

For tax years beginning on or after January 1, 2002, the charitable contributions deduction was repealed. A deduction for charitable contributions may become available again in future tax years if the rate on Form 1, Line 10 or 1-NR/PY, Line 12 income decreases to 5%.

2001 Law Change - Tax Year 2001 Only:
For tax years beginning on January 1, 2001 and ending on December 31, 2001, Massachusetts adopted the federal tax treatment for Charitable Contribution Deductions under the Internal Revenue Code as of January 1, 1998. A taxpayer could claim a charitable deduction equal to the amount of the charitable contribution deduction allowed or allowable to the taxpayer for the taxable year under I.R.C. Section 170.

All requirements, conditions and limitations imposed upon charitable contributions under the Code applied for purposes of determining the amount of the deduction allowed for Massachusetts. E.g. under the Internal Revenue Code, the deduction for charitable contributions was limited to a maximum of 20%, 30%, or 50% of a taxpayer's adjusted gross income, depending on the type of property given and the type of organization to which it was given. A taxpayer who deducted charitable contributions in Massachusetts had to apply the same federal limits to his or her Massachusetts contribution deduction. In order to be deductible, the contribution must have been paid on or after January 1, 2001, and before January 1, 2002.

Amount of Allowable Contribution:

  • If a taxpayer itemized deductions for federal income tax purposes, the amount allowed was the amount entered on Schedule A, Gifts to Charity;
  • If a taxpayer did not itemize deductions for federal income tax purposes, the amount allowed was the amount that would have been entered on Schedule A, Gifts to Charity as though the taxpayer were calculating a federal deduction for gifts to charity.

Limitation and Carryover of the Deduction:

  • If taxpayers had a Federal carryover charitable deductions from the prior year, they could not include the amount as a deduction for tax year 2001;
  • The charitable deduction was a Schedule Y deduction allowed against Form 1, Line 10 (Form 1-NR/PY, Line 12) income; it could not be claimed against Schedule B or D income.

Part-year residents had to multiply the amount of this deduction by the ratio in Massachusetts Form 1-NR/PY, Line 2, Total Days as Massachusetts Resident, since this deduction had to be prorated based upon the number of days a taxpayer was a Massachusetts resident.

Nonresidents
had to multiply the amount of this deduction by Massachusetts Form 1-NR/PY, Line 14g, Nonresident Deduction and Exemption Ratio, since this deduction had to be prorated based upon the amount of taxpayer's Massachusetts source income to his/her total income. 

Taxpayer Advisory if Not Itemizing Deductions on the Federal Return:

Taxpayers claiming this deduction were required to keep records to substantiate cash and noncash charitable contributions. Those who deducted noncash charitable contributions with a total value of over $500 had to file with the Commissioner a copy of Federal Form 8283 whether or not they itemized for federal tax purposes.

Prior to 2001:
This deduction was not allowed.


Child Care Expenses/Dependent Member of Household Deduction

Same-Sex Joint Filers: Impact of the Federal Defense of Marriage Act (DOMA) – Tax Years Prior to 2013:
Same-sex joint filers had to complete a pro forma U.S. Form 2441 or U.S. Form 1040A, Schedule 2. In addition to changing the maximum amount of the deduction allowed on the federal form (as required by the instructions to the Massachusetts Form 1), same-sex spouses had to prepare the pro forma federal forms as though they were filing a joint federal return.

Internal Revenue Code 1998 and 1988:
Massachusetts bases its child care expense deduction on the amount of qualifying expenses used to compute the federal child care credit under Code section 21. Massachusetts follows the Code as in effect on January 1, 2005. Prior to adopting the '05 Code, Massachusetts followed the Code as it existed on January 1, 1998, and before that, as it existed on January 1, 1988.

Internal Revenue Code § 21, on January 1, 1988:
Pursuant to Code § 21, taxpayer:

  • could claim the child care expense deduction for dependents fourteen years of age or under; and
  • did not need to reduce the amount of the deduction by the amount of employer-provided child care benefits excluded from Massachusetts gross income.

Later that same year, Code § 21 was amended making the following changes:

  • the credit was no longer available for thirteen and fourteen year old dependents;
  • and the amount of the qualifying expenses upon which the credit was based had to be reduced by the amount of employer-provided child care benefits excluded from the taxpayer's federal gross income.

Massachusetts did not automatically adopt these changes because we followed the Code as in effect on January 1, 1988. For Massachusetts purposes taxpayers could still claim the deduction for dependents fourteen years of age or under and did no need to reduce the deduction by the amount of child care benefits excluded from Massachusetts gross income.

For Tax Year 2001:

  • the maximum child care deduction was $3,600 for one qualifying individual and $7,200 for two or more qualifying individual;
  • the maximum dependent member(s) of household deduction was $2,400 for a single dependent, $4,800 for two or more dependents;

Prior to 2001:
This deduction was equal to the amount of employment related expenses allowed for purposes of determining the Credit for Child Care under the Internal Revenue Code.


Clean-Fuel Vehicles and Certain Refueling Property Deduction

Prior to 2007:

A deduction was allowed for a portion of the cost of qualifying motor vehicles that used clean-burning fuel in the year the vehicle was placed in service. A deduction was also allowed, subject to certain limitations, for the cost of qualified clean-fuel vehicle refueling property. Qualified clean-fuel vehicle refueling property was depreciable property (not including a building and its structural components) the original use of which began when the taxpayer either (1) stored clean-fuel or dispensed it into the fuel tank of a clean-fuel vehicle at a refueling location; or (2) recharged electric vehicles at a recharging location.

Under the January 2, 2005 Code, the federal deduction had expired for tax years after December 31, 2006. The Federal Energy Policy Act of 2005 (P.L. 109-58, enacted 8-8-05) replaced the clean-fuel burning deduction with a tax credit for hybrid vehicles effective for vehicles purchased or placed in service on or after January 1, 2006. This Act changed the expiration for the deduction from December 31, 2006 to December 31, 2005. However, given the change in the effective date was not part of the January 1, 2005 Code, DOR continued to adopt the Deduction for Clean-Fuel Vehicles for the 2006 tax year.


Commuter Deduction

Tax Year 2005:
For tax years beginning on or after January 1, 2005 and ending before January 1, 2006, the commuter deduction was not available.

Tax Year 2004:
For tax years beginning on or after 2004 and ending before January 1, 2005, a commuter deduction was allowed similar to the deduction allowed for tax years beginning on or after January 1, 2006.

Impact of the Exclusion for Employer Provided Transportation Fringe Benefits on the Commuter Deduction: 
Massachusetts had adopted the exclusion of employer provided transportation benefits under I.R.C. Section 132(f). However, a federal Act had created differences between the Massachusetts and federal exclusion amounts. These exclusion amounts impacted the commuter deduction as outlined below.

Employee Paid for MBTA Passes - Reduction in Gross Wages:

The employee's federal wages subject to tax were reduced by the amount paid by the employee for MBTA passes, subject to the monthly maximum amount allowed as a reduction.

  • federally, the monthly maximum amount allowed was $100. If an employee paid $110 per month for a T pass (or $110 x 12 = $1,320 per year), the federal wages subject to tax were reduced by $100, the maximum monthly amount (or $100 x 12 = $1,200 per year);

  • Massachusetts did not adopt this federal wage exclusion if the employer offered these benefits as a reduction in salary and the employee chose the benefits in lieu of salary. As a result, if amounts paid had reduced the employee's federal wages subject to tax, the employer had to add back the exclusion amount in the employee's W-2 for Massachusetts tax purposes.

Employer Paid for MBTA Passes - Increase in Gross Wages:
The employer paid for the MBTA pass for the employee and therefore, the value of the benefits was treated as wages over and above the employee's salary and was included in both federal and Massachusetts wages:

  • federally, the employee's wages subject to tax were reduced by the value of the benefit, subject to the monthly maximum amount allowed as a reduction If an employer paid $125 per month for a T pass ($125 x 12 = $1,500 per year) on behalf of an employee, the federal wages subject to tax was reduced by $100, the maximum monthly amount ($100 x 12 = $1,200 per year);

  • for Massachusetts purposes for 2004 the monthly maximum amount allowed was $75. If an employer paid $125 per month for a T pass ($125 x 12 = $1,500 per year), the Massachusetts wages subject to tax was reduced by $75, the maximum monthly amount ($75 x 12 = $900 per year).

The employee was eligible for the deduction for employer paid benefits only to the extent that such benefits were reported on the employee's W-2. The amount excluded could not be used in computing the commuter deduction; in this case, $900; only the remaining amount of $420 was available for the deduction.

Transportation Fringe Benefits Examples (Tax Year 2004 Only)

Example #1 - Employee Paid for MBTA Passes through Payroll Deduction - Reduction in Gross Wages:

Employee pays $110 per month, or $1,320 for the year

 FederalMass
Gross Wages$45,000$45,000
Federal Payroll Exclusion ($100 x 12)($1,200) 
Mass Payroll Exclusion does not apply00
Wages to Report

$43,800

$45,000

2004 Schedule Y, Line 9 Worksheet - Commuter Deduction
1. Enter amount paid for tolls through a Fastlane account-
2. Enter amount paid for weekly or monthly transit commuter
passes for MBTA transit or commuter rail (do not include amounts
reimbursed or otherwise deductible)
$1,320
3. Add lines 1 and 2. If $150 or less, you do not qualify for this
deduction. Omit remainder of this worksheet. Otherwise, complete lines 4
through 6
$1,320
4. Enter $150$150
5. Subtract line 4 from line 3$1,170
6. Enter the lesser of line 5 or $750 here and on Schedule Y, Line 9$750

Example #2 - Employer Paid for MBTA Passes - Increase in Gross Wages on W-2

Employer pays $125 per month, or $1,500 for the year
 FederalMass
Gross Wages$48,000$48,000
Value of Employer Benefits$1,500$1,500
Federal Payroll Exclusion ($100 x 12)($1,200) 
Mass Payroll Exclusion ($75 x 12)0($900)
Wages to report$48,300$48,600
2004 Schedule Y, Line 9 Worksheet - Commuter Deduction
1. Enter amount paid for tolls through a Fastlane account-
2. Enter amount paid for weekly or monthly transit commuter
passes for MBTA transit or commuter rail (do not include amounts
reimbursed or otherwise deductible) ($1,500 - $900)
$600
3. Add lines 1 and 2. If $150 or less, you do not qualify for this deduction. Omit remainder of this worksheet. Otherwise, complete lines 4 through 6$600
4. Enter $150$150
5. Subtract line 4 from line 3$450
6. Enter the lesser of line 5 or $750 here and on Schedule Y, Line 9$450

Prior to January 1, 2004: 
The deduction was not allowed.


Educator Expenses Allowed under I.R.C. § 62(a)(2)(D)

2005 Law Change - Tax Year 2005 Only:
For tax years beginning on or after January 1, 2006, the Educator Deduction has been repealed. Even if Congress extends this deduction, DOR will not adopt the extension because it will occur after January 1, 2005.

For tax years beginning on January 1, 2005 and ending on December 31, 2005, Massachusetts had adopted the federal treatment for Educator's Deduction under the Internal Revenue Code, as amended and in effect on January 1, 2005. Any federal tax law changes to this deduction would not be automatically adopted. Massachusetts would continue to follow the Code of January 1, 2005.

The deduction was for expenses paid or incurred by an eligible educator for books, supplies, equipment (including computers and software) and other qualified materials used in the classroom. The deduction was limited to $250 per eligible educator.

An eligible educator had to meet the following two requirements:

  1. work in a kindergarten through grade 12 as either a:
    • Teacher
    • Instructor
    • Counselor
    • Principal, or
    • Aide
  2. work at least 900 hours a school year in a school that provides elementary or secondary education, as determined under state law.

Tuition and Fees Allowed under I.R.C. § 62(a)(18) 

2005 Law Change - Tax Year 2005 Only:
For tax years beginning on or after January 1, 2006, the Tuition and Fees Deduction has been repealed. Even if Congress extends this deduction, DOR will not adopt the extension because it will occur after January 1, 2005.

For tax years beginning on or after January 1, 2005 and ending on December 31, 2005, Massachusetts had adopted federal treatment for the Tuition and Fees Deduction under the Internal Revenue Code, as amended and in effect on January 1, 2005. Any federal extension of this deduction would not be adopted by Massachusetts since the extension was not incorporated into the Code as of January 1, 2005. The deduction was for qualified higher education expenses and:

  • Taxpayers with adjusted gross incomes that did not exceed $65,000 ($130,000 in the case of married taxpayers filing joint returns) were allowed a maximum deduction of $4,000; and
  • Taxpayers with adjusted gross incomes that did not exceed $80,000 ($160,000 in the case of married taxpayers filing joint returns) were allowed a maximum deduction of $2,000.

Taxpayers could choose between the following two deductions; if the taxpayer qualified for both deductions, the allowable deduction was the greater of the two amounts. Under no circumstances could a taxpayer claim both deductions:

  • College Tuition Deduction; or
  • Tuition and Fees Deduction.

Federal Hope Scholarship or Lifetime Learning Credits under IRC § 25A:
Taxpayers who had elected federally to take the Hope Scholarship or Lifetime Learning Credits were federally disallowed from taking the tuition and fees deduction; these taxpayer were also disallowed from taking the tuition and fees deduction for Massachusetts personal income tax purposes. Therefore, taxpayers had to take into account the loss of the Massachusetts allowance of the tuition and fees deduction when making the IRC § 25A election.

Reimbursement by Employer: 
No deduction was allowed for any portion of expenses that were paid or reimbursed by an employer and excluded from gross income under IRC Section 127.

Prior to 2005:
Both the Educators Deduction and the Tuition and Fee Deduction were not allowed since Massachusetts had previously used the Code as amended and in effect on January 1, 1998, and this federal deduction was not incorporated into the Code of January 1, 1988.


Federal Student Loan Interest Deduction

Same-Sex Joint Filers: Impact of the Federal Defense of Marriage Act (DOMA) – Tax Years Prior to 2013:
Massachusetts allows as an option the federal "interest on education loans" deduction. The federal deduction phases out based on modified AGI. Same-sex joint filers had to use the "Student Loan Interest Deduction" worksheet in the instructions to Federal Form 1040 or 1040A making sure to combine their income figures, and perform the calculation as though they were filing a joint federal return.

The Massachusetts undergraduate student loan interest deduction is not tied to the federal deduction and calculating it was the same for same-sex spouses and opposite-sex spouses. It was not phased out based on AGI amount.

Prior 2005 - Federal Student Loan Interest Deduction:
For tax years beginning before January 1, 2005, Massachusetts followed the Code as amended and in effect on January 1, 1998. Under the January 1, 1998 Code this deduction was limited to the first 60 months of the loan, subject to lower taxpayer income limitations and had lower contribution limits through the 2001 tax years.

Federal Deduction under EGTRAA - Massachusetts Did Not Adopt the Federal Provisions of EGTRRA: 
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) expanded the benefits in tax year 2002 of the federal deduction for interest paid on a qualified education loan. Since Massachusetts did not adopt the new provisions, the deduction was calculated according to the provisions for this deduction as they existed under the 1998 Code.

Maximum Deduction Allowed was Tied to Federal Deduction Allowed under Code of 1/1/98
Tax year beginning in:Dollar amount:
2001 and thereafter$2,500
2000$2,000
1999$1,500
1998$1,000


To deduct student loan interest, a taxpayer had to follow the rules of IRC § 221 as in effect on January 1, 1998:

  • only student loan interest paid during the first 60 months in which interest payments were required was deductible;
  • a taxpayer whose filing status was single or head of household could not take the deduction if his or her modified adjusted gross income ("modified AGI") was $55,000 or more ($75,000 or more if taxpayers had filed a joint return);
  • the amount of the student loan interest deduction was phased out (gradually reduced) if the taxpayer's modified AGI was more than $40,000 but less than $55,000 (more than $60,000 but less than $75,000 if taxpayers had filed a joint return).

To figure the phase-out, the interest deduction was multiplied (before the phase-out) by a fraction, the numerator of which was modified AGI minus $40,000 ($60,000 in the case of a joint return); the denominator of which was $15,000. The result was then subtracted from the deduction (before the phase-out). The result was the amount deductible.

Example:
Taxpayers paid $800 interest on a qualified graduate student loan; their modified AGI was $72,000 and filed a joint return. Taxpayers had to reduce the deduction by $640, figured as follows:

$72,000 - $60,000 = 80% phase-out percentage
$15,000

$800 X 80% (.80) = $640 phase-out amount

Allowable Schedule Y, federal deduction = $160 ($800 - $640)

1998 Law Change:
Effective January 1, 1998, Massachusetts had adopted the federal treatment for the Interest on Education Loans Deduction under the Internal Revenue Code, as amended and in effect on January 1, 1998. Any federal tax law changes to this deduction were not automatically adopted. Massachusetts continued to follow the "Code" of January 1, 1998. Massachusetts therefore did not adopt the federal provisions of EGTRRA.

Prior to 1998:
This deduction was not allowed.


Employee Business Expense Deduction

Same-Sex Joint Filers: Impact of the Federal Defense of Marriage Act (DOMA) – Tax Years Prior to 2013:
Same-sex joint filers had to recalculate their combined allowable expenses as appearing on Federal Form 1040, Schedule A, under the heading 'Job Expenses and Most Other Miscellaneous Deductions', combining their AGIs to use in performing the 2% calculation, and had to complete the worksheet in the Form 1 instructions.


Home Heating Fuel Deduction (2005 and 2006 Only)

Certain owners and renters of residential property could claim a home heating fuel deduction up to a maximum of $800 for the cost of home heating oil, natural gas, and propane purchased between November 1, 2005 and March 31, 2006. A taxpayer who qualified for the deduction had to apply the deduction in taxable year 2005 for purchases made between November 1, 2005 and December 31, 2005.

If the taxpayer did not take the full $800 deduction in taxable year 2005, the taxpayer could take the remainder in taxable year 2006 for purchases made between January 1, 2006 and March 31, 2006.

The deduction was available to:

  • single persons whose adjusted gross income was $50,000 or less; and
  • joint filers and heads of household filers whose adjusted gross income was $75,000 or less.

Married filing separate taxpayers did not qualify for the home heating fuel deduction.

Qualifying Expenses:

  • Monthly Budget Fuel Plan. A monthly budget fuel plan spread the cost of fuel over 12 months; the monthly budget payment was calculated based on estimated usage and expected average fuel price for the heating season. Only the payments made during the period November 1, 2005 through December 31, 2005 qualified for the deduction in 2005, and payments made during the period January 1, 2006 through March 31, 2006 qualified for the deduction in 2006.
  • Credit Card Payments. Where a taxpayer purchased fuel using a credit card to make payments, the transaction dates relating to fuel purchases must have fallen during the period November 1, 2005 through December 31, 2005, for the 2005 deduction, and during the period January 1, 2006 through March 31, 2006 for the 2006 deduction. The dates on which the taxpayer paid the credit card bills for fuel did not control.

Qualifying taxpayers were those who:

  • owned a single-family home could claim the amount of qualified expenses for home heating fuel;
  • owned a multiple-unit dwelling (multifamily residence that included taxpayer's residence) could only claim his or her proportional share of qualified expenses for home heating fuel;
  • owned a condominium or cooperative dwelling and for whom heat purchases were accounted for in a common area fee or special assessment for such costs could claim the amount of qualified expenses for home heating fuel as may be reasonably attributed to the percentage ownership share of the condominium or cooperative dwelling ( e.g., the condominium owner's percentage interest in the undivided interest of common areas and facilities); and
  • dwelled in a multi-purpose building, e.g., a storefront with an apartment above, could only claim the proportional share of the qualified expenses for home heating fuel that corresponded to the portion of the building used and occupied as a residence.

Qualifying Taxpayers Who Rented:
A qualifying taxpayer who rented a residential dwelling and who paid his or her own separate heating bill could claim the amount of qualified expenses for home heating fuel.

If, however, a qualifying taxpayer who rented a residential dwelling that was not individually metered, and where heating expenses were included in the rent, 20% of rent actually paid was considered attributable to heat. Computation of the amount of the deduction was a two-step process:

  1. for tax year 2005, the taxpayer had to determine the amount of rent actually paid by the taxpayer for rent for November 1, 2005 through December 31, 2005. (In the case of multiple renters in a residential dwelling, the taxpayer used only the amount of rent paid by him or her, not the total rent for the unit.) ;
  2. the amount of actual rent paid (for November and December) was multiplied by 20% to determine the amount of the deduction. However, the deduction as calculated was subject to a maximum of $800.

Example: Mary, a single taxpayer with $45,000 in adjusted gross income, paid rent of $600 per month for November and December 2005, or $1,200 for the two-month period. Mary had a lease where heating expenses were included in rent. For purposes of the deduction, the amount of rent considered attributable to heat is $1,200 multiplied by 20% (.20), or $240. Mary's deduction for home heating fuel was $240 for 2005.

Also, since Mary's allowable deduction was less than $800, Mary was able to deduct an additional amount for the rent paid for the period from January 1 through March 31, 2006. In 2006, Mary had $47,000 in adjusted gross income and paid monthly rent of $610 per month for January 1 through March 31, 2006, or $1,830 for the three-month period. Mary's deduction for home heating fuel was $366 for 2006.

Qualification for Home Heating Fuel Deduction was determined by completing the following worksheets:
Taxpayers first had to compute their adjusted gross income to see if they qualified; part-year and nonresidents had to compute adjusted gross income as if they were residents. The amount of allowable deduction was determined by completing the following worksheet:

  • for residents, the Schedule Y, Line 14 Worksheet;
  • for part-year residents, the Schedule Y, Line 14 Worksheet. The amount that was reported on this worksheet was the lesser of $800 or total payments that were made for home heating oil, natural gas or propane purchased while a resident between November 1, 2005 and December 31, 2005.
  • for nonresidents, the Schedule Y, Line 14 Worksheet. The amount that was reported on this worksheet was the lesser of $800 or total payments that were made for home heating oil, natural gas or propane purchased between November 1, 2005 and December 31, 2005. To determine the amount allowable, they had to multiply the amount of this deduction by Form 1-NR/PY, Line 14g, Nonresident Deduction and Exemption Ratio since this deduction had to be prorated based upon the amount of taxpayer's Massachusetts source income to his/her total income.

Excess Qualified Expenses for Home Heating Fuel Incurred from November 1, 2005 and December 31, 2005:
A qualifying taxpayer could deduct the amount of qualified expenses for home heating fuel against Form 1, Line 10 or Form 1-NR/PY, Line 12 income. Any excess of the allowable deduction over Form 1, Line 10 or Form 1-NR/PY, Line 12 income could be deducted against Schedule B and D income.

The order in which the exemptions were claimed as follows:

  1. against Schedule B income after deductions for allowable excess trade or business deductions, short-term capital losses, unused long-term capital losses and 50% long-term capital gains deduction (for collectibles and pre-1996 installment sales);
  2. against Schedule D income after netting long-term gains and losses, applying any excess Schedule D losses against Schedule B income, deducting excess Schedule B losses and deducting allowable excess trade or business deductions.

Any remaining excess exemptions could not be carried forward to subsequent tax year.


Health Savings Accounts

HSA Contributions Annual Maximum Amounts

Calendar
Year
Contribution Limit
Individual Plan
Contribution Limit
Family Plan
Contribution
Catch-up 55 Years+
Total Allowed
Individual Plan
Total Allowed
Family Plan
2013$3,250$6,450$1,000$4,250$7,450
2012$3,100$6,250$1,000$4,100$7,250
2011$3,050$6,150$1,000$4,050$7,150
2010$3,050$6,150$1,000$4,050$7,150
2009$3,000$5,950$1,000$4,000$6,950
2008$2,900$5,800$900$3,800$6,700
2007$2,850$5,650$800$3,650$6,450

Prior to the Tax Relief and Health Care Act of 2006, (P.L. 109-432), the maximum annual aggregate contribution to an HSA was the lesser of (1) the amount of the annual deductible for the health plan or (2) the maximum permitted deduction as adjusted for inflation. This Act repealed the annual plan deductible limitation on HSA contributions.

For calendar year 2006, the contribution limit was equal to the lesser of:

  • the health plan's annual deductible; or
  • $2,700 for an individual plan or $5,450 for a family plan;
  • catch up contributions for Individuals age 55 or older is $700

For calendar year 2005, the contribution limit was equal to the lesser of:

  • the health plan's annual deductible; or
  • $2,650 for an individual plan or $5,250 for a family plan;
  • catch up contributions for individuals age 55 or older is $600

Medical Savings Accounts (Archer MSAs)

Prior 1998: 
Effective January 1, 1998, Massachusetts adopted the federal treatment of MSAs under the Internal Revenue Code, as amended and in effect on January 1, 1998 which allowed a deduction for an Archer MSA contribution only for individuals who were active MSA participants before January 1, 2001.


Massachusetts References:

Charitable Deduction

Child Care Expenses/Dependent Member of Household Deduction

Health Savings Account

Home Heating Fuel Deduction

Same-Sex Joint Filers