Generally, taxpayers may not use excess trade or business deductions to offset interest (other than from Massachusetts banks), dividends and capital gains income. However, if the taxpayer files a Massachusetts Schedule C or a Massachusetts Schedule E, Massachusetts law allows such offsets if the following requirements are met:
- The excess trade or business deductions must be adjusted gross income deductions allowed under MGL Ch. 62, section 2(d).
- These excess deductions may only be used to offset income that is effectively connected with the active conduct of a trade or business or any income allowed under IRC § 469(d)(1)(B) to offset losses from passive activities.
Page updated: May 11, 2020