General Rules

Dividend is any item of federal gross income treated as a dividend under the Code. Generally, it is a distribution made by a corporation to its shareholders of company earnings and profits.

Note: ordinary dividend has the same meaning as dividend.

Interest has the same meaning as in I.R.C. Section 163 including all amounts treated as interest by virtue of the operation of other I.R.C. sections.

For Massachusetts purposes:

  • Federal gross income excludes interest income from state and local obligations. These excluded amounts however, are reported for informational purposes only on U.S. Form 1040, Line 8b.
  • Massachusetts gross income includes interest income from state and local obligations to the extent such interest is excluded from federal gross income. Massachusetts gross income, however does not include interest income from obligations issued by the Commonwealth or any political subdivision.
  • Amounts excluded from Federal gross income and reported for informational purposes only on U.S. Form 1040, Line 8b are reported on Massachusetts Schedule B, Line 1, including interest income from obligations issued by the Commonwealth or any political subdivision.
  • Since interest from obligations issued by the Commonwealth or any political subdivision is reported on Massachusetts Schedule B, Line 1, such amount will be subtracted on Massachusetts Schedule B, line 6.
  • 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 Massachusetts Schedule B, Line 1. These amounts are then excluded on Massachusetts Schedule B, Line 6 to the extent included in federal gross income.
  • Certain interest defined as Massachusetts bank interest qualifies for an exemption of either $100 or $200 depending on filing status.

Threshold for Filing

Massachusetts Follows Federal Filing Requirements for Dividends Only:
Taxpayers do not need to file Federal Schedule B if they have ordinary dividend income of $1,500 or less.

Massachusetts Requirement to File Schedule B for Interest:
As in past years, certain taxpayers with bank or other financial accounts in a foreign country, and certain taxpayers involved in foreign trust transactions, must continue to file Schedule B regardless of the amount of interest or dividends they receive.

Dividends Including Federal Qualified Dividends - Amount Reported Federally:
Each taxpayer issues a Form 1099-DIV, Dividends and Distributions:
 

  • total ordinary dividends which are found in Box 1a of the 1099-DIV are reported on U.S. Schedule B, Part II, Line 6 and then on U.S. Form 1040, Line 9a;
  • qualified dividends are found in Box 1b of the 1099-DIV. This is the portion of the amount in box 1a that is considered to be qualified dividends eligible for a lower tax rate federally. This amount, included in both Schedule B, Part II, Line 6 and then on U.S. Form 1040, Line 9a, is reported on U.S. Form 1040, Line 9a, is reported on U.S. Form 1040, Line 9b.

Massachusetts References:

Money Market Deposit Accounts:


Real Estate Tax Escrow Interest:
  • LR 79-10: Interest Paid By a Credit Union on Advance Payments of Real Estate Taxes

State/Municipal Obligations:
U.S. Obligations:

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