General Rules

Massachusetts adjusted gross income is Massachusetts gross income less certain allowable federal deductions under I.R.C. Sections 62 and 404 such as alimony paid, moving expenses, student loan interest paid, etc.. These allowable federal deductions are claimed on Schedule Y, Lines 1 through 10.

However, line 4 of Schedule Y is an exception in that these amounts are not included in Massachusetts gross income even though amounts are initially reported on Massachusetts Form 1 or 1-NR/PY but then such amounts are removed entirely on line 4.

No Tax Status and the Limited Income Credit are based on Massachusetts adjusted gross income, as well as the College Tuition deduction .

Trade or business deductions allowable under I.R.C. §§ 62 and 404 include:

  • Trade or business deductions referenced by I.R.C. § 62(a)(1) which are deductions allowed by the current Internal Revenue Code (unless modified by M.G.L., Chapter 62);
  • Trade or business deductions other than those referenced by I.R.C. § 62(a)(1) which are deductions allowed by the 2005 Internal Revenue Code;
  • Other deductions allowable under I.R.C. § 62 of the 2005 Internal Revenue Code (unless specifically disallowed by M.G.L., Chapter 62).

Trade or business deductions allowable under I.R.C. §§ 62 and 404 are:

  • Deductions for contributions of employers to employees' qualified pension plan under I.R.C. § 404 with certain exceptions (DD 01-07);
  • Expenses of travel, meals and lodging while away from home or transportation expenses relating to performance of services as an employee;
  • Other expenses related to alimony, health savings accounts, medical savings accounts, moving expenses, penalty on early savings withdrawal, self-employed health insurance and student loan interest.

Federal Deductions Not Allowed on Massachusetts Schedule Y:


Other Federal Deductions Not Allowed under I.R.C. §§ 62 and 404


Massachusetts Deductions - Schedules B and D

Interest, dividends and certain capital gains are further modified. Massachusetts generally does not follow federal rules with respect to these modifications c. 62 s. 2(c)(1)-(3):