Fees
Fees that are included in federal gross income are generally included in Massachusetts gross income.
Limitation of Losses
Massachusetts adopts the federal definition of "capital gain income" to include the restrictions on the deductions of losses from personal use property under Internal Revenue Code (“Code”) §§ 165(c), 262 and 267 in effect on January 1, 2022. These restrictions are adopted in tax reporting forms.
Deductions on losses for individuals are limited to:
- Losses incurred in a trade or business*
- Losses incurred in a transaction for profit even if not connected to a trade or business
- Losses of property not connected with a trade or business or a transaction entered into for profit, if such losses arise from:
- Fire
- Storm
- Shipwreck
- Other casualty
- Theft
* For tax years 2021 through 2026, individuals may not deduct from Massachusetts gross income “excess business losses” to the same extent as prohibited for federal tax purposes by Code § 461(l).
For more information, go to TIR 23-5: Chapter 62 Conformity to Select Provisions of the 2022 Internal Revenue Code.
Losses that are not deductible:
- Losses for personal, living, and family expenses
- Losses from related party transactions
- Losses from property held for personal use, including a personal residence, household goods, and a personal automobile.
Additional Resources
Mortgage Forgiveness
Starting in 2022, mortgage forgiveness is excluded from Massachusetts gross income if it is excluded from federal gross income under Code § 108 as in effect on January 1, 2022. The exclusion applies only to qualified principal residence indebtedness that is discharged before, or will be discharged subject to a written arrangement entered into before, January 1, 2026.
For prior years, Massachusetts did not adopt the federal exclusion for discharged qualified principal residence indebtedness.
Additional Resources
Other Income or Losses to Report on Form 1 or Form 1-NR/PY
Other income included in Massachusetts gross income:
- Pre-1996 installment sales classified as ordinary income for Massachusetts purposes
- Embezzled (or other) income from illegal activities
- Awards and bonuses received from an employer for performing services that are not part of a qualified award plan
- Any other income that was reported on a federal return and not reported elsewhere on the Massachusetts return.
Other income and losses not included in Massachusetts gross income:
- Any "net operating loss" reported on the federal return
- Refunds of U.S. and Massachusetts income taxes. However, report interest on refunds on Massachusetts Schedule B
Passive Activity Losses
Income and losses on a tax return are divided into 2 categories:
- Passive activities
- Non-passive activities
Income and losses from passive activities include income and losses in which the individual does not materially participate under the rules of Code § 469(h) during the year. In general, a passive activity loss is the amount (if any) by which the passive activity deductions for the taxable year exceed the passive activity gross income for the taxable year. Massachusetts adopts the federal treatment of passive activity losses under Code § 469 as in effect on January 1, 2022.
For more information, go to:
Additional Resources
Prizes and Awards
Prizes and awards are included in Massachusetts gross income to the same extent they are included federally under Code § 74 in effect on January 1, 2022.
Jury Duty
To the same extent as for federal tax purposes under Code § 62(a)(13), Massachusetts gross income does not include payments for jury duty, as long as jury duty pay is surrendered by the employee to the employer in return for continuing the employee’s normal salary while on jury duty.
Additional Resources
Contact for Other Types of Massachusetts Taxable Income
Phone
9 a.m.–4 p.m., Monday through Friday