DeductionCalculation of 2013 DeductionWhere Deducted
Abandoned Building Renovation Deduction Massachusetts law allows as a deduction an amount equal to 10% of the costs incurred in renovating qualifying abandoned buildings located in an Economic Opportunity Area (EOA). Schedule C or E
 

Alimony Paid

 

 

A deduction is allowed for total amount paid to a former spouse during the taxable year for alimony or separate maintenance under a court decree.

Child Support Payments do not qualify as an alimony deduction; amounts are not deductible by the payer and are not included in Massachusetts gross income by the recipient.

Schedule Y, Line 3 
Adjustment to Gross Income  

 
Allowable Excess Trade or Business Deduction The excess of allowable Form 1 or Form 1-NR/PY deductions over Form 1 or Form 1-NR/PY income may be deducted against other types of gross income that are effectively connected with the active conduct of a trade or business of the taxpayer.Schedule C-2 
 
Attorney Fees and Court Costs Involving Certain Unlawful Discrimination Claims A deduction is allowed for attorney fees and court costs paid for, or on behalf of, the taxpayer in connection with any action involving a claim of unlawful discrimination.Schedule Y, Line 9
Adjustment to Gross Income
Certain Business Expenses of National Guard and Reserve Members A deduction is allowed for unreimbursed overnight travel, meals and lodging expenses of National Guard and Reserve Members who must travel more than 100 miles from home to perform services as a National Guard or reserve member.Schedule Y, Line 9
Adjustment to Gross Income
Certain Business Expenses of Qualified Performing Artist

A deduction is allowed for certain business expenses. 

Schedule Y, Line 9
Adjustment to Gross Income
Certain Business Expenses of State and Local (Free-Basis) Government Officials

 
A deduction is allowed for expenses paid or incurred with respect to services performed by an official as an employee of a state or local government (or political subdivision of a state or local government) if the official is compensated in whole or part on a fee basis. Generally, this deduction applies to officials who provide certain services to the government, and who hire employees and incur expenses in connection with their official duties.Schedule Y, Line 9
Adjustment to Gross Income

 
Child Care Expenses for Child under Age 13 or Disabled Dependent or Spouse



















 

A deduction is allowed for amounts paid to care for a qualifying child, or a disabled dependent or spouse so that a taxpayer may work or look for work. Massachusetts bases its child care expense deduction on the amount of qualifying expenses used to compute the federal child care credit under I.R.C. § 21.

This deduction:

  • Is not limited to the amount of employment related expenses allowed for purposes of determining the Federal Credit for Child and Dependent Care Expenses calculated on U.S. Form 2441; but
  • cannot exceed the Massachusetts maximum allowable amount of $4,800 for one qualifying individual and $9,600 for two or more qualifying individuals. The deduction is limited to a maximum of $9,600 regardless of the total number of dependent household members;
  • must be reduced by the Dependent Care Benefits (DCB) amounts paid or incurred by an employer to any employee for care assistance of the employee's dependents received as shown on the W-2.

Taxpayers may choose between this deduction and the Dependent Member(s) of Household under Age 12, or Dependents Age 65 or Older, or Disabled Dependents Deduction; if the taxpayer qualifies for both deductions, the allowable deduction is the greater of the two amounts. Under no circumstances may a taxpayer claim both deductions.

Married filing separate taxpayers do not qualify for this deduction.

Form 1, Line 12 





















 
Claim of Right Deduction  











 

Taxpayers who have paid Massachusetts personal income taxes in a prior year on income attributed to them under a "claim of right" may deduct such amounts of that income from their gross income if it is later determined that they:  1.) were not in fact entitled to the income, and 2.) have repaid the amounts in question.

The deduction is allowed in the year of repayment, provided:

  1. the amount was previously included in Massachusetts taxable income; and
  2. the repayment is not otherwise deductible in determining Massachusetts income. Because Massachusetts already allows for certain deductions under IRC §§ 62 (relating to trade or business expenses) and 404 (without regard to § 265), the claim of right deduction may be taken only if amounts repaid were not otherwise deductible.
Schedule Y, Line 14 











 
College Tuition Deduction  














 

Massachusetts allows a deduction for tuition payments paid by taxpayers for themselves, their spouses, and their dependents to qualifying two or four year colleges leading to undergraduate or associate degrees, diplomas, or certificates. The deduction is equal to the amount by which the tuition payments, less any scholarships, grants or financial aid received, exceed 25% of the taxpayer's Massachusetts adjusted gross income.

Tuition payments for students pursuing graduate degrees at such colleges or universities are not eligible for the college tuition deduction.

No deduction is allowed for any amount paid for room and board, books, supplies, equipment, personal living expenses, meals, lodging, travel or research, athletic fees, insurance expenses, or other expenses unrelated to an individual's academic course of instruction.

Educational Assistance Programs :
No deduction is allowed for any portion of expenses that are paid or reimbursed by an employer and excluded from gross income under IRC § 127.

Schedule Y, Line 11 














 
Commuter Deduction  
















 

Individuals may deduct certain commuting costs against their Form 1 or 1-NR/PY income for:

  • tolls paid through the Massachusetts E-ZPass account; or
  • the cost of weekly or monthly transit commuter passes for Massachusetts Bay Transit Authority transit, bus, commuter rail or commuter boat.

Amount Allowed:

  • single, married filing separate or head of household filers - the deduction applies only to the portion of commuter costs that exceeds $150;
  • married couples filing joint - the deduction applies only to the portion of commuter costs of each individual that exceeds $150. One spouse cannot transfer his or her excess deduction to the other spouse.

The total amount deducted may not exceed $750 for each individual.

Transportation Fringe Benefits :
Amounts paid must be reduced by any amounts reimbursed or otherwise deductible.

Schedule Y, Line 15 
















 
Deductible Expenses Related to Income from the Rental of Personal Property Engaged in for Profit A deduction is allowed only if related income is reported on Massachusetts Schedule X, Line 4.Schedule Y, Line 9
Adjustment to Gross Income
Dependent Member(s) of Household under Age 12, or Dependents Age 65 or Older, or Disabled Dependents Deduction  





 

Single taxpayers, taxpayers filing as head of household and married taxpayers filing a joint return may claim a deduction for a dependent household member. This deduction applies to households with either child under the age of twelve and/or with eligible elderly or disabled members who qualify as dependents under I.R.C. Section 152.

This deduction is $3,600 for a single dependent and $7,200 for two or more dependents. The deduction is limited to a maximum of $7,200 regardless of the total number of dependent household members.

Married filing separate taxpayers do not qualify for this deduction.

Form 1, Line 13 








 
Depreciation

 
For Massachusetts purposes, depreciation may be claimed on all assets, regardless of when they are placed in service, using the method used for federal income tax purposes prior to the enactment of IRC § 168(k).Schedule C or E 

 
Employee Business Expenses  
























 

The Massachusetts deduction is limited to the deductions allowed by Part VI of the Internal Revenue Code which:

  • for an employee, include unreimbursed expenses of travel, meals and lodging while away from the tax home over a sleep period, or expenses of transportation paid or incurred by the employee in connection with the performance of services as an employee; or
  • for a salesperson, are federally deductible unreimbursed employee expenses if they are attributable to a trade or business in which the employee is a salesperson who solicits business for an employer away from the employer's place of business.

50% of qualified business meals and entertainment expenses may be claimed as a deduction. This limited deduction is also subject to the Massachusetts restriction that the business meal expenses (and entertainment) must be incurred while away from home.

To qualify for the Massachusetts employee business expense deduction, three conditions must be met:

  1. the taxpayer must itemize deductions on the federal return;
  2. if filing a joint U.S. return, a joint return must be filed in Massachusetts; and
  3. unreimbursed business expenses combined with the other miscellaneous itemized deductions (reported on U.S. Form 1040, Schedule A, lines 20 - 22) must exceed 2% of federal adjusted gross income reported on U.S. Form 1040, Schedule A, line 25. Unreimbursed travel and transportation expenses of a handicapped employee which are also impairment related business expenses are not subject to the 2% floor.
 Schedule Y, Line 1
Adjustment to Gross
Income 






















 
Gambling Activities




 
Massachusetts adopts the deductions permitted under I.R.C. § 62 of the Internal Revenue Code ("Code"), with certain modifications. The deductions allowed under the Code include those deductions that are attributable to a trade or business. In particular, the Code allows a deduction for losses from wagering transactions to the extent of wagering gains. Thus, a Massachusetts taxpayer may deduct wagering losses to the extent of winnings, but only if the wagering activities of the taxpayer constitute a trade or business. 


 
Health Savings Account (HSA) Deduction Massachusetts adopts the federal deduction allowed to individuals for contributions to a Health Savings Account, subject to federal limitations which are adjusted annually for inflation. Health Savings Accounts (HSAs) are designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis.Schedule Y, Line 8
Adjustment to Gross Income  
Human Organ Donation Deduction  



 
Pursuant to Chapter 68 of the Acts of 2011, effective for tax years beginning on or after January 1, 2012, individuals who donate organs to other persons for human organ transplantation may claim an amount equal to the following expenses incurred and related to the organ donation: (i) travel expenses; (ii) lodging expenses; and (iii) lost wages not to exceed $10,000. “Human organ” means all or parts of human bone marrow, liver, pancreas, kidney, intestine or lung. Part-year and nonresidents are not eligible to claim this deduction.  Schedule Y, Line 16




 
Incapacitated Firefighter or Police Officer Income Exclusion  

 
Although income received by a firefighter, police or correctional officer incapacitated in the line of duty is excluded from Massachusetts gross income, the income received must be included in the employee's Massachusetts gross income and reported as "wages" on MA Form 1, Line 3. The amount is then claimed as a Schedule Y deduction.Schedule Y, Line 4
Adjustment to Gross Income
Jury Duty Pay Remittance  



 
Generally, jury duty pay reflected on a Form 1099 must be included in both the employee's federal and Massachusetts gross income and reported as "other income" on Schedule X, Line 4. If the jury duty pay is surrendered by the employee to the employer in return for continuing the employee's normal salary while on jury service, then the amount is also deductible from gross income.  Schedule Y, Line 9
Adjustment to Gross Income 

 
Medical Savings Account (Archer MSA) Deduction





 
Archer MSAs are tax-exempt trusts or custodial accounts to which tax-deductible contributions may be made by individuals with a high deductible health plan. In addition, employer contributions made on behalf of the employee are excludable from the employee's gross income. For MSAs established prior to January 1, 2006, DOR adopts the federal deduction for Archer MSA contributions for all federally qualified individuals. Self-employed individuals and employees of small employers may be permitted to maintain medical savings accounts to pay medical expenses, provided that the accounts are used in conjunction with "High Deductible" health insurance.Schedule Y, Line 6
Adjustment to Gross
Income 




 
Moving Expenses  















 

Employees or self-employed individuals may deduct the expense of moving themselves and their families provided the move relates to employment or business income that is subject to Massachusetts tax. 

Any Moving Expense Reimbursement may not be claimed as a deduction; only out of pocket expenses may be deducted.

In order to claim the deduction, all of the following criteria must be met:

  1. the taxpayer's new main job location is at least 50 miles farther from his/her former home than his/her old main job location was from the former home (new commute is at least 50 miles farther than old commute);
  2. the taxpayer must be employed full time for at least 39 weeks during the 12-month period immediately following the move. If self-employed, the taxpayer must be employed or performing services full time for at least 78 weeks during the 24-month period immediately following the move and at least 39 weeks during the first 12-months; and
  3. the amount spent on moving is reasonable. 
 Schedule Y, Line 5
Adjustment to Gross Income 













 

Nonresident and Part-Year Resident











 

Deductions are:

  • deducted in full if directly related to specific items of taxable income reported on Form 1-NR/PY or to a personal residence located in Massachusetts;
  • prorated for nonresidents based on income reported - the deduction must be multiplied by the Massachusetts Form 1-NR/PY, Line 14, Nonresident Deduction and Exemption Ratio. This ratio is a fraction; the numerator of which is Massachusetts gross income and the denominator of which is the amount which would have been Massachusetts gross income had the taxpayer been a resident of the Commonwealth throughout the full taxable year.
  • prorated for part-year residents based on days a Massachusetts resident - the deduction must be multiplied by the Massachusetts Form 1-NR/PY, Line 2, Number of Days as a Massachusetts Resident Ratio. This ratio is a fraction; the numerator of which is the number of days taxpayer is a Massachusetts resident and the denominator of which is 365 days.
 
Out-of-State Employee Contributory Government Pension  














 

Individuals who move into Massachusetts and receive pension distributions from their former states' public employee retirement plans may deduct such amounts from Massachusetts gross income if the former state does not tax income received by its residents from Massachusetts contributory public employee retirement plans.

The income received must first be included in the employee's Massachusetts gross income as pension income on Form 1, Line 4. If the amount is deductible from Massachusetts gross income, it is then claimed as a deduction on Schedule Y, Line 13.

A Massachusetts resident may deduct income received from a contributory annuity, pension, endowment or retirement fund of another state or its political subdivisions if:

  • the other state has a specific income exclusion for pension income which applies to Massachusetts state or local contributory public employee pension plans; or
  • the other state has a specific deduction or exemption for pension income which applies to Massachusetts state or local contributory public employee pension plans; or
  • the other state has no income tax.
 Schedule Y, Line 13















 
Partnership and S Corporation Deductions A partner in a partnership or a shareholder in an S Corporation is subject to tax on his or her distributive share of the partnership's/corporation’s income or losses; a partner/shareholder  may also claim his or her distributive share of certain allowable deductions and credits. Schedule E

 
Penalty on Early Withdrawal of Savings



 

A deduction is allowed for amounts paid as a penalty for early withdrawal of funds from a time savings account or certificate of deposit provided that interest on such savings was reported as income on either the current or prior year returns.

Federal 10% penalty paid for early withdrawal of IRA and Keogh plans may not be claimed for this deduction.

Schedule Y, Line 2
Adjustment to Gross Income 


 
Reforestation Amortization and Expenses A deduction is allowed equal to the federal deduction allowed.Schedule Y, Line 9
Adjustment to Gross Income
Rent Paid  


 
A deduction is allowed for rent paid by the taxpayer during the taxable year for a principal residence located in Massachusetts. This deduction is limited to 50% of the rent paid not to exceed a total deduction of $3,000. The deduction must be for rent that the taxpayer paid to a landlord for the rental or lease of taxpayer's principal residence in Massachusetts. Form 1, Line 14


 
Repayment of Supplemental Unemployment Benefits














 

Benefits received from an employer-financed fund to which the employees did not contribute are not treated as unemployment compensation. They are taxable as wages and are subject to withholding for income tax, but may not be subject to social security and Medicare tax. These supplemental unemployment benefits are usually paid under guaranteed annual wage plans and must be reported as income. 

Taxpayers may have to repay some of their supplemental unemployment benefits to qualify for trade readjustment allowances under the Trade Act of 1974. If such amounts are repaid in the same tax year as received, then they may be deducted.

To claim this deduction, however, the amount of supplemental unemployment benefit must be reported as income on MA Form 1, Line 3.

If repayment occurs in a subsequent year, the taxpayer may take a deduction provided a tax was paid on the income in the year received because he believed he had a right to it. The deduction must be taken in the year of repayment. If the taxpayer has no income against which to take the deduction, the amount may not be used in a later year.

Schedule Y, Line 9
Adjustment to Gross Income













 
Section 179 Expenses




 

Massachusetts follows the current Code for purposes of I.R.C. §179, which provides an election to expense certain depreciable business assets in its initial year (qualifying property, called section 179 property) rather than treat them as capital expenditures.

To the extent a taxpayer is eligible to deduct trade or business expenses in Massachusetts, the taxpayer is allowed a I.R.C. §179 deduction in the same amount as allowed federally.

 
Self-Employed Health Insurance Deduction  
 
 
Self-employed persons may deduct from gross income amounts paid during the taxable year for health insurance for themselves, their spouses, and dependents. The deduction is limited to the taxpayer's annual earned income derived from the trade or business for which the insurance plan was established. Schedule Y, Line 7
Adjustment to Gross Income 
 
Social Security (FICA) and Medicare Deduction  



















 

A taxpayer may claim a deduction for the amount contributed in the taxable year to FICA or a Railroad Retirement Plan, or to a U.S. or Massachusetts Retirement fund up to $2,000. If married filing joint, each spouse may claim up to $2,000 of his or her own contributions. Payment amounts may not be combined or transferred from one spouse to the other.

Specifically, this deduction is allowed for the following:

  • taxes paid to the U.S. under the provisions of the Federal Insurance Contributions Act (FICA), Social Security;
  • taxes paid to the U.S. under the provisions of the Federal Railroad Retirement Act, Tier I & II;
  • contributions to a United States annuity, pension endowment or retirement fund; and
  • contributions to a Massachusetts State, city, town, county and other political subdivision annuity, pension endowment or retirement fund.

Medicare tax withheld from wages should be added to the FICA or U.S. or Massachusetts pension contribution for this deduction, the amount not to exceed $2,000.

Medicare premiums deducted from social security benefits or retirement payments are not an allowable deduction since the benefits are not included in gross income.

Self-employed individuals may deduct the employment tax paid during the taxable year up to a maximum of $2,000. 

Form 1, Line 11a and
11b, if MFJ

 

















 

Student Loan Interest Deduction, Federal

 
A deduction is allowed for interest paid by the taxpayer, up to an annual maximum of $2,500, for a qualified education loan for both undergraduate and graduate education, subject to taxpayer income limitations. Any federal tax law changes to this deduction will not be automatically adopted. Massachusetts will continue to follow the Code of January 1, 2005.  Schedule Y, Line 10
 Adjustment to Gross Income
Student Loan Interest Deduction, Massachusetts Undergraduate



















 

A taxpayer may claim a Massachusetts deduction for interest payments on certain education debt. 

"Education debt" must be a loan that meets all of the criteria below:

  1. it is administered by the financial aid office of a two-year or four-year college at which the taxpayer, or a qualified dependent, was enrolled as an undergraduate student;
  2. it must have been secured through a state student loan program, a federal student loan program, or a commercial lender; and
  3. it must have been spent solely for the purposes of paying tuition and other expenses directly related to the school enrollment.

The Massachusetts deduction:

  • applies only to undergraduate education loans and not to graduate education loans;
  • unlike the federal deduction, there is no maximum deduction amount allowed; whatever amount qualifies is allowable;
  • unlike the federal deduction, the Massachusetts deduction is allowed regardless of taxpayer's income and regardless of the age of the loan.

The deduction is not allowed if the taxpayer claims the deduction allowed under IRC § 221 for the same interest payments.

Schedule Y, Line 12 




















 
Trade or Business Expenses  To the extent a taxpayer is allowed to deduct trade or business expenses in Massachusetts, the amount of the Massachusetts deduction corresponds to the amount of the federal deduction.Schedule C or E 
 
U.S. Tax Treaties, Income Exclusion  

 
To the extent that income is excluded federally per a tax treaty, it is excluded for Massachusetts purposes. However, such income must still be reported if such income exceeds the threshold requirement for filing a tax return. The income is included in the employee's Massachusetts gross income and reported as "wages." The amount is then claimed as a Schedule Y deduction.Schedule Y, Line 4 
Adjustment to Gross Income