Employer retirement plans include qualified pensions, profit sharing plans, stock bonus plans, Keoghs, 401(k)'s, and public employee plans (U.S., a state or political subdivision thereof, other than state deferred compensation plan.)

Previously taxed contributions are amounts that were not allowed as a deduction at the time an individual contributed to the IRA.

Distributions up to the amount of previously taxed contributions are not taxable. Since Massachusetts does not provide any tax benefit at the time of contribution (no deduction for contribution allowed), it will provide a tax benefit for such contributions at the time of distribution.

To claim the contribution as a federal deduction on the U.S. 1040 depends on:
  • whether or not an individual is covered by an employer retirement plan; and
  • federal modified AGI.


Example:
Single taxpayer qualifies to claim the maximum deduction for federal purposes. 

Tax YearIRA Contribution1040 DeductionForm 1Deduction
2000$2,000($2,000)$0
2001$2,000($2,000)$0
2002$3,000($3,000)$0
2003$3,000($3,000)$0
Total Contributions$10,000($10,000)$0
Interest earned on contributions$11,200  
IRA Balance in 2010$21,200  

For Massachusetts purposes:

  • previously taxed contributions equal $10,000;
  • in 2011, taxpayer receives a $6,000 distribution from his IRA;
  • in 2012, taxpayer receives a $6,000 distribution from his IRA;
  • in 2013, taxpayer receives a $6,000 distribution from his IRA.


To calculate how much of each distribution would be taxable, taxpayer fills out the Schedule X, Line 2 Worksheet:

For 2011:

2011 Schedule X, Line 2 Worksheet - Taxable IRA/Keogh Plan, Qualified Charitable IRA Distributions and Roth IRA Conversion Distributions

Complete the Schedule X, line 2 worksheet to calculate the taxable portion of any amount you received from an Individual Retirement Account (IRA), Keogh, qualified charitable IRA distribution or Roth IRA conversion distribution. Since Massachusetts does not allow a deduction for amounts originally contributed to an IRA or Keogh, the distributions are not taxable until the full amount of your contributions which were previously subject to Massachusetts taxes are recovered.

Contributions made to Keogh accounts prior to 1975 were deductible when made. Therefore, no deduction may be taken from a Keogh distribution for amounts contributed before 1975.

If completing the worksheet to report conventional IRA/Keogh distributions, qualified charitable IRA donations or Roth IRA conversion distributions, complete lines 1 through 7, omit lines 8 through 11 and complete line 12. If completing the worksheet to report Roth IRA conversion distributions not elected to be included on your 2010 U.S. tax return, omit lines 1 through 7 and complete lines 8 through 12.

If completing the worksheet to report conventional IRA/Keogh distributions, qualified charitable IRA donations or Roth IRA conversion distributions occurring in 2011 and Roth IRA conversion distributions not elected to be included on your 2010 U.S. tax return, complete lines 1 through 12.

Line 1. Total IRA/Keogh plan distributions, qualified charitable IRA
deductions, Roth IRA conversion distributions during 2011
$6,000
Line 2. Total contributions previously taxed by
Massachusetts
$10,000
Line 3. Total distributions received in previous years$0
Line 4. Subtract line 3 from line 2. If line 3 is larger than line 2, enter "0"$10,000
Line 5. Subtract line 4 from line 1 and enter the result here. Not less than "0"$0
Line 6. Total qualified charitable IRA distributions in 2011 included in line 1$0
Line 7. Taxable IRA/Keogh distributions or Roth IRA conversion
distributions. Subtract line 6 from line 5 and enter result here and on
Schedule X, line 2. Not less than "0"

$0
Note: Complete lines 8 to 11 only if during 2010 you received Roth IRA
conversion distributions and did not elect to include them in full
on you 2010 U.S. tax return. Otherwise, go to line 12.
 
Line 8. Total 2010 Roth IRA conversion distributions if not elected to include in full on 2010 U.S. tax return received during 2010. $0
Line 9. Amount of contributions in line 8 that were previously taxed by Massachusetts. $0
Line 10. Subtract line 9 from line 8. Not less than "0." $0
Line 11. 2010 taxable Roth IRA conversion distributions not elected to report in full on your 2010 U.S. tax return. Multiply line 10 by .5 (50%). $0
Line 12. Total taxable IRA/Keogh, 2011 Roth IRA conversion distributions, 2011 taxable Roth IRA distributions and 2010 Roth IRA conversion distributions (if not elected to include in full). Add lines 7 and line 11 and enter the result here and in Schedule X, line 2.

$0

Note: You must complete separate worksheets if married filing a joint return and both you and your spouse received IRA/Keogh Plan, qualified charitable IRA distributions and/or Roth IRA conversion distributions.

For 2012:

2012 Schedule X, Line 2 Worksheet - Taxable IRA/Keogh Plan, Qualified Charitable IRA Distributions and Roth IRA Conversion Distributions

Complete the Schedule X, line 2 worksheet to calculate the taxable portion of any amount you received from an Individual Retirement Account (IRA), Keogh, qualified charitable IRA distributions or Roth IRA conversion distribution. Since Massachusetts does not allow a deduction for amounts originally contributed to an IRA or Keogh, the distributions are not taxable until the full amount of your contributions which were previously subject to Massachusetts taxes are recovered.

Contributions made to Keogh accounts prior to 1975 were deductible when made. Therefore, no deduction may be taken from a Keogh distribution for amounts contributed before 1975.

If completing the worksheet to report conventional IRA/Keogh distributions, qualified charitable IRA donations or Roth IRA conversion distributions, complete lines 1 through 5, omit lines 6 through 9 and complete line 10. If completing the worksheet to report Roth IRA conversion distributions not elected to be included on your 2010 U.S. tax return, omit lines 1 through 5 and complete lines 6 through 10.

If completing the worksheet to report conventional IRA/Keogh distributions, qualified charitable IRA donations or Roth IRA conversion distributions occurring in 2012 and Roth IRA conversion distributions not elected to be included on your 2010 U.S. tax return, complete lines 1 through 10.

Line 1. Total IRA/Keogh plan distributions, qualified charitable IRA distributions, Roth IRA conversion distributions received during 2012$6,000
Line 2. Total contributions previously taxed by Massachusetts$10,000
Line 3. Total distributions received in previous years$6,000
Line 4. Subtract line 3 from line 2. If line 3 is larger than line 2, enter "0"$4,000
Line 5. Subtract line 4 from line 1 and enter result here.  Not less than “0”$2,000
Line 6. Total qualified charitable IRA distributions in 2012 included in line 1$0
Line 7. Taxable IRA/Keogh distributions or Roth IRA conversion distributions. Subtract line 4 from line 1 and enter the result here. Not less than “0”$2,000
Note: Complete lines 8 to 11 only if during 2010 you received Roth IRA
conversion distributions and did not elect to include them in full
on you 2010 U.S. tax return. Otherwise, go to line 12.
 
Line 8. Total 2010 Roth IRA conversion distributions if not elected to include in full on 2010 U.S. tax return received during 2010. $0
Line 9. Amount of contributions in line 8 that were previously taxed by Massachusetts.

 $0

Line 10. Subtract line 9 from line 8. Not less than "0."

 $0

Line 11. 2010 taxable Roth IRA conversion distributions not elected to report in full on your 2010 U.S. tax return. Multiply line 10 by .5 (50%). $0

Line 12. Total taxable IRA/Keogh, 2012 Roth IRA conversion distributions, 2012 taxable Roth IRA distributions and 2010 Roth IRA conversion distributions (if not elected to include in full). Add lines 7 and 11 and enter the result here and in Schedule X, line 2.

Note: You must complete separate worksheets if married filing a joint return and both you and your spouse received IRA/Keogh Plan, qualified charitable IRA distributions and/or Roth IRA conversion distributions.

$2,000

For 2013:

2013 Schedule X, Line 2 Worksheet - Taxable IRA/Keogh Plan, Qualified Charitable IRA Distributions and Roth IRA Conversion Distributions

Complete the Schedule X, line 2 worksheet to calculate the taxable portion of any amount you received from an Individual Retirement Account (IRA), Keogh, qualified charitable IRA distributions or Roth IRA conversion distribution. Since Massachusetts does not allow a deduction for amounts originally contributed to an IRA or Keogh, the distributions are not taxable until the full amount of your contributions which were previously subject to Massachusetts taxes are recovered.

Contributions made to Keogh accounts prior to 1975 were deductible when made. Therefore, no deduction may be taken from a Keogh distribution for amounts contributed before 1975.

Note: Contributions from a deferred plan, such as a 401(k), that were rolled over into an IRA are not considered pre-taxed contributions.

Line 1. Total IRA/Keogh plan distributions, qualified charitable IRA distributions, Roth IRA conversion distributions received during 2013$6,000
Line 2. Total contributions previously taxed by Massachusetts$10,000
Line 3. Total distributions received in previous years$12,000
Line 4. Subtract line 3 from line 2. If line 3 is larger than line 2, enter "0"$0
Line 5. Subtract line 4 from line 1 and enter result here.  Not less than “0”$6,000
Line 6. Total qualified charitable IRA distributions in 2013 included in line 1$0
Line 7. Taxable IRA/Keogh distributions or Roth IRA conversion distributions. Subtract line 4 from line 1 and enter the result here. Not less than “0”$6,000
Note: You must complete separate worksheets if married filing a joint return and both you and your spouse received IRA/Keogh Plan, qualified charitable IRA distributions and/or Roth IRA conversion distributions. 

For federal purposes:


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