- Federal U.S. 1040, Adjustments to Gross Income, Line 36, Allowed on Massachusetts Schedule Y, Lines 1-10
- General Rules
- Federal Deductions Allowed on Massachusetts Schedule Y
- Alimony Paid
- Attorney Fees and Court Costs Involving Certain Unlawful Discrimination Claims
- Certain Business Expenses of National Guard and Reserve Members
- Certain Business Expenses of Qualified Performing Artist
- Certain Business Expenses of State and Local Government Officials
- Contributions by Certain Chaplains to I.R.C. § 403(b) Plans
- Deductible Expenses Related to Income from the Rental of Personal Property Engaged in for Profit
- Employee Business Expenses
- Health Savings Account (HSA) Deduction
- Jury Duty Pay Remittance
- Medical Savings Account (Archer MSA) Deduction
- Moving Expenses
- Penalty on Early Withdrawal of Savings
- Reforestation Amortization and Expenses
- Repayment of Supplemental Unemployment Benefits
- Self-Employed Health Insurance Deduction
- S Corporation Shareholder SEP, SIMPLE, and Qualified Plans allowed under I.R.C. § 404
- Student Loan Interest Deduction, Federal
- Federal Deductions Not Allowed on Massachusetts Schedule Y
- Attorney Fees and Court Costs in Connection with IRS Detected Tax Law Violations
- Contributions to I.R.C. § 501(c)(18)(D) Pension Plans
- Deductible Part of Self-Employment Tax Allowed under I.R.C. § 164(f)
- Domestic Production Activities Deduction Allowed under I.R.C. § 199
- Educator Expenses Allowed under I.R.C. § 62(a)(2)(D)
- IRA Deduction Allowed under I.R.C. § 219
- Self-Employed SEP, SIMPLE, and Qualified Plans allowed under I.R.C. § 404
- Tuition and Fees Allowed under I.R.C. § 62(a)(18)
- Other Federal Deductions Not Allowed under I.R.C. §§ 62 and 404
- Any Deduction Related to Income Not Included in Massachusetts Gross Income
- Depreciation Bonus Deduction Allowed under I.R.C. § 168(k)
- Forfeitures Due to Premature Withdrawal of Funds Deduction Allowed under I.R.C. § 165
- Life Tenant Income Beneficiaries Deduction Allowed under I.R.C. § 62(a)(5)
- Losses From the Sale or Exchange of Property Allowed under I.R.C. § 165(f)
- Net Operating Loss Deduction Allowed under I.R.C. § 172
- Ordinary Income Portion of a Lump Sum Distribution Deduction Allowed under § 402(e)(3)
- Political Deductions Allowed under I.R.C. §§ 162e
- Qualified Stock Bonus and Profit Sharing Plan Deduction Allowed under I.R.C. § 1379(b)(3)
- S Corporation Deduction, Taxed as a Corporate Trust
- State Legislators' Travel Expenses Away from Home Deduction Allowed under I.R.C. § 162(h)
- Income Included but Then Deducted
- Massachusetts Deductions - Schedules B and D
Massachusetts adjusted gross income is Massachusetts gross income less certain allowable federal deductions under I.R.C. §§ 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.
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.
- Attorney Fees and Court Costs In Connection with IRS Detected Tax Law Violations
For federal purposes, an individual may deduct attorney fees and court costs paid in connection with an award from the IRS for information provided that helped the IRS detect tax law violations, up to the amount of the award includible in gross income. Massachusetts does not allow this deduction since it was added to the Internal Revenue Code of 2006 at 62(a)(21) and Massachusetts follows the "Code" of January 1, 2005.
- Contributions to I.R.C. § 501(c)(18)(D) pension plans
For federal purposes, a participant in a section 501(c)(18) plan which is a trust created before June 25, 1959, funded only by employee contributions may make certain annual contributions. Massachusetts does not allow this deduction.
- Deductible part of self-employment tax allowed under I.R.C. § 164(f)
The IRS allows a deduction equal to one-half of self-employment taxes paid. Since self-employment payments from U.S. Form SE may be claimed as a deduction up to $2,000 on either Massachusetts Form 1 or 1-NR/PY per G.L. c.62 s. 3B(a)(3), the IRS deduction is not allowed for Massachusetts purposes.
- Domestic production activities deduction allowed under I.R.C. § 199
For federal purposes, an individual may deduct a percentage of qualified production activities income for the taxable year. Massachusetts does not allow this deduction.
- IRA deduction allowed under I.R.C. § 219
For federal purposes, an individual may deduct up to a maximum amount of contributions to an IRA if certain criteria are met. This includes any amount contributed to a 501(c)(18) plan. Massachusetts does not allow this deduction.
- Self-Employed SEP, SIMPLE, and qualified plans allowed under I.R.C. § 404
For Federal purposes, sole proprietors and partners may deduct contributions made to these plans for themselves. For Massachusetts purposes, self-employed individuals as defined under I.R.C. § 401(c)(1) are not entitled to the deduction under I.R.C. § 404 to the extent attributable to contributions made on behalf of themselves.
Since S corporation shareholders do not fall under the definition of self-employed individuals, they are considered employees and therefore do not need to add back the amount of contributions.
- For more information, see Self-Employed Individuals under 401(k) Qualified Cash or Deferred Arrangements Plan , Savings Incentive Match Plan for Employees - SIMPLE Account or Simplified Employee Pension Plan-SEP or SEP IRA .
- Any deduction related to income not included in Massachusetts gross income
For example, Medicare deducted from social security benefits is not an allowable deduction since the benefits are not included in Massachusetts gross income.
- Depreciation bonus deduction allowed under I.R.C. § 168(k)
For federal income tax purposes, taxpayers are entitled to an additional first-year depreciation deduction, under I.R.C. § 168(k), equal to a percentage of the adjusted basis of "qualified property" acquired by a certain date. Under 2002 legislation, Massachusetts decoupled from bonus depreciation allowed under I.R.C. § 168(k), as amended and in effect for the current year. Therefore, Massachusetts does not adopt this additional depreciation deduction.
- Forfeitures due to premature withdrawal of funds deduction allowed under I.R.C. § 165
For Massachusetts purposes, this deduction is not allowed to the extent that the income represented by such forfeiture is not included in Massachusetts gross income.
- Life tenant income beneficiaries deduction allowed under I.R.C. § 62(a)(5)
For Massachusetts purposes, any deduction relating to life tenants and income beneficiaries of property is not allowed to the extent a trust or estate taxable under this section is allowed the deduction.
- Losses from the sale or exchange of property allowed under I.R.C. § 165(f)
The IRS allows limited excess capital losses over capital gains that may be applied against other income as well as unused capital losses as capital losses in the succeeding years. Massachusetts does not allow these federal special capital loss treatments.
- Net operating loss deduction allowed under I.R.C. § 172
Massachusetts does not allow for the federal provisions to either carry back or carry forward any unused net operating loss.
- Ordinary income portion of a lump sum distribution deduction allowed under § 402(e)(3)
The IRS allows an averaging election, which effectively taxes distributions in the year received at a reduced rate. This method for reporting the distribution is not available in Massachusetts. Massachusetts taxes the full distribution as shown on U.S. Form 4972, not the reduced amount of distribution reported on U.S. 1040.
- Political deductions allowed under I.R.C. §§ 162(e)
For Massachusetts purposes, political deductions that are not allowed: any amount paid or incurred in connection with either influencing legislation; participating in any political campaign on behalf of or in opposition of any public office candidate; attempting to influence the general public with respect to elections or legislative matters; or communicating directly with an executive branch official in an attempt to influence them.
- Qualified stock bonus and profit sharing plan deduction allowed under I.R.C. § 1379(b)(3)
This deduction relates to amounts not received as benefits from certain qualified pension plans.
- S Corporation deduction, taxed as a corporate trust
For Massachusetts purposes, any deduction allowed by Subchapter S of the Code with respect to a federal S corporation that is taxed as a corporate trust is not allowed since such deduction is claimed by the corporate trust.
- State legislators' travel expenses away from home deduction allowed under I.R.C. § 162(h)
Massachusetts does not allow these deductions.
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):
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