Federal Gross Income

Federal gross income means income from whatever source derived, including (but not limited to) the following items:

  • alimony and separate maintenance payments;
  • annuities;
  • compensation for services, including fees, commissions, fringe benefits and similar items (W-2 wages);
  • distributive share of partnership gross income;
  • dividends (from shares of stock in a company);
  • gains derived from dealings in property (Capital gains from sale or exchange of property);
  • gross income derived from business (Schedule C);
  • income from life insurance and endowment contracts;
  • income from discharge of indebtedness (forgiveness of credit card debt);
  • income in respect of a decedent;
  • income from an interest in an estate or trust.
  • interest (from bank, insurance policies, etc);
  • pensions (1099r);
  • rents (Schedule E);
  • royalties (Schedule E)

Income Excluded from Federal but Included in Massachusetts

  • Interest Income from State (Other than MA) & Local Obligations Excluded under I.R.C. § 103
    Massachusetts gross income includes interest on state and local obligations to the extent such interest is excluded from federal gross income. These excluded amounts are reported for informational purposes only on U.S. Form 1040, Line 8b and therefore are included on Line 1 of Massachusetts Schedule B. However, interest from obligations issued by the Commonwealth or any political subdivision is not taxable and therefore will be subtracted on line 6 of Massachusetts Schedule B.
  • Massachusetts Retirement Contributory Payments under I.R.C. § 414(h)
    These amounts are excluded from federal gross income; for Massachusetts, such amounts are added back to compute gross income so that a taxpayer may claim the deduction under c. 62, s. 3B(a)(4) for contributions made to a Massachusetts annuity, pension, endowment or retirement fund. The maximum deduction allowed is $2,000 per taxpayer. The payments added back are reflected in Massachusetts wages as shown in Box 16 of the W-2 statement. This amount will be more than the amount shown as Federal wages in Box 1 of the W-2.
  • Earned Income from Foreign Sources Excluded under I.R.C. § 911
    For federal purposes, income earned abroad by Massachusetts residents is excluded from gross income; such amount is added back to arrive at Massachusetts income.

Income Excluded from Massachusetts but Included in Federal:

  • Interest Income from Certain U.S. Obligations
    Massachusetts gross income does not include interest on obligations of the United States to the extent such interest is included in federal gross income. These amounts are reported and taxed on U.S. Form 1040, Line 8a and therefore are included on Line 1 of Massachusetts Schedule B. These amounts are then excluded on Line 6 of Schedule B to the extent included in federal gross income.
  • Pension Income - Massachusetts and U.S. Government Contributory
    Massachusetts gross income does not include income from a contributory annuity, pension, endowment or retirement fund of the United States government or the Commonwealth or any political subdivision.
  • Pension Income - Military Noncontributory
    Massachusetts gross income does not include noncontributory pension income or survivorship benefits received from the U.S. uniformed services. This includes pensions from the Army, Navy, Marine Corps, Air Force, Coast Guard, commissioned corps of the Public Health Service and the National Oceanic and Atmospheric Administration.
  • Previously Taxed Income from Annuity, Stock Bonus, Pension, Profit Sharing Plan
    Massachusetts gross income does not include distributions from annuities, pensions, etc. described in I.R.C. §§ 403(b) and 404, IRAs described in I.R.C. §§ 408 and 409, and Keogh plans that represent previously taxed income. Only the distribution amounts over the previously taxed income are taxable.
  • Social Security Benefits
    Massachusetts gross income does not include Social Security benefits. Such amounts may be included in federal gross income depending on income thresholds under I.R.C. § 86.
  • Holocaust Survivors Payments to the Extent Included in Federal Gross Income
    Massachusetts gross income does not include distributions or payments, including interest, made to an individual because of his/her status as a victim of Nazi persecution, nor income attributable to, derived from, or related to assets stolen or hidden from or lost to Germany, immediately prior to, during or immediately after WW II.
  • Capital Gain Dividends Received from a Regulated Investment Company
    Massachusetts gross income does not include dividends received from a regulated investment company qualifying under I.R.C. § 851 which are capital gain dividends under I.R.C. § 852, but only to the extent of the portion of such capital gain dividends attributable to gains from Massachusetts obligations that are exempt from taxation under any provision.
  • Death Benefits Paid by Reason of the Death of an Employee Who is a Terrorist Victim to the Extent Included in Federal Gross Income
    Massachusetts gross income does not include amounts paid by an employer by reason of the death of an employee who is a specified terrorist victim to the extent such amount is included in Federal gross income. This provision does not apply to (i) amounts which would have been payable after death if the individual had died other than as said specified terrorist victim; and (ii) incidental death benefits paid from a plan described in the provisions of I.R.C. §401(a) and exempt from tax under I.R.C. §501(a).
  • Disability Income Related to a Terroristic or Military Action to the Extent Included in Federal Gross Income
    Massachusetts gross income does not include amounts received by an individual as disability income attributable to injuries incurred as a direct result of a terrorist or military action as defined in I.R.C. § 692(c)(2 in effect for the current taxable year.
  • Disaster Relief Payment Resulting from a Terroristic or Military Action to the Extent Included in Federal Gross Income
    Massachusetts gross income does not include any amount paid to or for the benefit of an individual (a) to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster; (b) to reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation, of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation, or replacement is attributable to a qualified disaster, (c) by a person engaged in the furnishing or sale of transportation as a common carrier by reason of the death or personal physical injuries incurred as a result of a qualified disaster, or (d) if such amount is paid by the United States or a state or local government, or agency or instrumentality thereof, in connection with a qualified disaster in order to promote the general welfare, but only to the extent any expense compensated by such payment is not otherwise compensated for by insurance or otherwise.
  • Discharge of Indebtedness by Reason of Death due to Terrorist Attack to the Extent Included in Federal Gross Income
    Massachusetts gross income does not include any amount which, but for this section, would be included in gross income by reason of the discharge, in whole or in part, of indebtedness of any taxpayer if the discharge is by reason of the death of an individual incurred as the result of the terrorist attacks against the United States on September 11, 2001, or as the result of illness incurred as a result of an attack involving anthrax occurring on or after September 11, 2001, and before January 1, 2002.
  • Dividends from a Corporate Trust that are Exempt from Tax under c. 62 s. 8
    Chapter 62, Section 8 exempts dividends from a corporate trust taxable under Section 8 except for dividends from the trust's tax-free earnings and profits.
  • Dividends Received from a Regulated Investment Company Exempt from Tax
    Massachusetts gross income does not include dividends received from a regulated investment company qualifying under I.R.C. § 851 which are exempt interest dividends under I.R.C. § 852, but only to the extent of the portion of such exempt interest dividends directly attributable to interest from Massachusetts obligations that are exempt from taxation under any provision.
  • Income Received from a Trustee or Other Fiduciary
    Massachusetts gross income does not include income received from any trustee or other fiduciary that is taxable under Chapter 62 to the trustee or fiduciary.
  • Income from U.S. Patents Issued to Massachusetts Residents As Useful for Energy Conservation
    Any income received from the sale, lease or other transfer of a patent approved by the Commissioner of energy resources, including royalty income and any income received from the sale, lease, or transfer of property subject to the patent is deducted from federal gross income for a period not to exceed five years from the date of the issuance of the U.S. patent.