College Tuition Deduction
Massachusetts allows a deduction for tuition payments paid by taxpayers for themselves, and their dependents who attend a qualifying two or four-year college leading to an undergraduate or associates degree, diploma, or certificate. To qualify as a dependent for purposes of this deduction, the individual must be a “dependent” as defined by Internal Revenue Code (“Code”) § 151(c) as in effect on January 1, 2022.
The deduction is equal to the amount by which the tuition payments, less any scholarships, grants, or financial aid received, exceed 25% of the taxpayer's Massachusetts adjusted gross income.
Tuition payments for students pursuing graduate degrees are not eligible for the college tuition deduction.
Qualified college tuition expenses include only those expenses designated as tuition or mandatory fees required for the enrollment or attendance of the taxpayer or any dependent of the taxpayer at an eligible educational institution.
No deduction is allowed for the following:
- Room and board
- Books
- Supplies
- Equipment
- Personal living expenses
- Meals
- Lodging
- Travel or research
- Athletic fees
- Insurance expenses
- Other expenses unrelated to an individual's academic course of instruction.
Qualification for College Tuition Deduction is determined by completing the following worksheets / Schedules:
For residents:
- The Massachusetts AGI Worksheet (Form 1 instructions) and
- The College Tuition Deduction Worksheet (Form 1, Schedule Y instructions)
Non-residents and part year residents are ineligible for the college tuition deduction. Go to TIR 16-15.
Student Loan Interest Deductions
Massachusetts allows two student loan interest deductions for interest paid on a qualified education loan:
- The federal deduction under § 221 for both graduate and undergraduate student loan interest paid (Reported on Schedule Y, which has a maximum amount allowed)
- The Massachusetts deduction for interest paid on a qualified undergraduate student loan (Reported on Schedule Y, which is unlimited)
A taxpayer may not claim both deductions for the same interest payments.
Federal Student Loan Interest Deduction
Massachusetts adopts the federal deduction for student loan interest under Code § 221 in effect on January 1, 2022. Any federal changes to this deduction after January 1, 2022 will not be automatically adopted.
The deduction is allowed for interest paid by the taxpayer, up to an annual maximum of $2,500, on a qualified education loan for undergraduate or graduate education, subject to taxpayer income limitations.
The amount of the deduction depends on:
- Filing status and
- Federal modified adjusted gross income (MAGI)
In tax year 2022, the $2,500 maximum deduction for interest paid on qualified education loans begins to phase out for taxpayers with federal MAGI in excess of $70,000 ($145,000 for joint returns) and is completely phased out for taxpayers with federal MAGI of $85,000 or more ($175,000 or more for joint returns). See IRS Rev. Proc. 2021-45. In tax year 2023, the deduction begins to phase out for taxpayers with federal MAGI in excess of $75,000 ($155,000 for joint returns) and is completely phased out for taxpayers with federal MAGI of $90,000 or more ($185,000 or more for joint returns). See IRS Rev. Proc. 2022-38. The deduction is phased out based on a taxpayer’s federal MAGI in the following manner:
For single filers in 2022:
Phase-out percentage = (federal MAGI - $70,000)/$15,000
Federal student loan interest deduction = total student loan interest paid up to $2,500 – (total student loan interest paid * phase-out percentage)
For joint filers in 2022:
Phase-out percentage = (federal MAGI - $145,000)/$30,000
Federal student loan interest deduction = total student loan interest up to $2,500 – (total student loan interest * phase-out percentage)
See examples below.
Qualified Education Loan for Dependents:
For the purposes of the federal student loan interest deduction, “qualified education loan” means any debt incurred by the taxpayer solely to pay qualified higher education expenses on behalf of the taxpayer or, as of the time the debt was incurred, the taxpayer's spouse or dependent.
An individual who may be claimed as a dependent on someone else’s return may not claim the federal student loan interest deduction.
This deduction impacts the calculation of No Tax Status and the Limited Income Credit, as it is treated as an adjustment to arrive at Massachusetts adjusted gross income on the Massachusetts AGI Worksheet and Schedule NTS-L-NR/PY.
Massachusetts Undergraduate Student Loan Interest Deduction
A taxpayer may claim a Massachusetts deduction for interest payments on certain education debt.
"Education debt" is a loan that meets all of the criteria below:
- It is administered by the financial aid office of a two-year or four-year college at which the taxpayer, or a qualified dependent (see College Tuition Deduction section above),was enrolled as an undergraduate student; and
- The loan must have been secured through a:
- State student loan program;
- Federal student loan program; or
- Commercial lender
- The loan was used solely for the purposes of paying tuition and other expenses directly related to the school enrollment.
Unlike the federal deduction, the Massachusetts deduction:
- Applies only to undergraduate education loans and not to graduate education loans;
- Has no cap on the deduction amount allowed; and
- Is allowed regardless of the taxpayer’s income and the age of the loan.
The deduction is not allowed if the taxpayer claims the deduction allowed under Code § 221 for the same interest payments.
This deduction does not impact the calculation of No Tax Status and the Limited Income Credit, as it is treated as a deduction to arrive at Massachusetts taxable income.
Educational Assistance Programs
None of the interest deductions discussed above may be taken if the educational expense is:
- Paid or reimbursed by an employer; and
- Excluded from gross income under Code § 127.
Student Loan Interest Deduction Examples – For Tax Year 2022
Examples showing how to deduct student loan interest where the federal student loan interest deduction phase-out rules do not apply:
Example #1
Single taxpayer with federal modified adjusted gross income (MAGI) of $48,000 and
undergraduate interest of $2,900:
Since this single taxpayer's federal MAGI is $70,000 or less, he or she can deduct interest as follows:
- Allowable federal deduction – up to $2,500, the maximum federal deduction for combined undergraduate and graduate interest paid
- Allowable Massachusetts deduction – $2,900 minus the amount claimed under the federal deduction
Example #2
Married taxpayers filing jointly with federal MAGI of $103,000 who have:
Graduate interest of $1,700
Undergraduate interest of $1,500
Total student loan interest of $3,200
Since taxpayers' federal MAGI is $145,000 or less, they can deduct interest as follows:
- Allowable federal deduction – up to $2,500, the maximum federal deduction for combined undergraduate and graduate interest paid
- Allowable Massachusetts deduction - $1,500 minus amount claimed as a federal deduction for undergraduate interest
Example #3
Married taxpayers filing jointly with federal MAGI of $85,000 who have:
Graduate interest of $3,000
Undergraduate interest of $1,100
Total student loan interest of $4,100
Since taxpayers' federal MAGI is $145,000 or less, they can deduct interest as follows:
- Allowable federal deduction – $2,500, the maximum federal deduction for combined undergraduate and graduate interest paid (in this example the maximum federal deduction would be claimed just for graduate interest)
- Allowable Massachusetts deduction - $1,100, the undergraduate interest not claimed as a federal deduction
Examples demonstrating how to deduct student loan interest where the federal student loan interest deduction phase-out rules apply:
Example #1
Married taxpayers filing jointly with federal MAGI of $155,000 who have:
Graduate interest of $2,300
Undergraduate interest of $1,000
Total student loan interest of $3,300
Since taxpayers' federal MAGI falls within the phase-out thresholds of $145,000 to $175,000 for married taxpayers filing jointly, they must reduce the federal deduction as follows:
Federal interest phase-out percentage:
($155,000 - $145,000)/ $30,000 = 33% phase-out percentage
Federal total interest phase-out amount:
$2,500 x .33 = $825 phase out amount
Allowable federal deduction:
$2,500 – $825 = $1,675 allowable deduction
The taxpayer can deduct student loan interest paid in the following manner:
- Federal deduction – up to $1,675, total deductible interest reduced by phase out amount
- Massachusetts deduction – $1,000, for the undergraduate interest not claimed as a federal deduction
Example #2
Married taxpayers filing jointly with federal MAGI of $185,000 who have:
Graduate interest of $1,900
Undergraduate interest of $800
Total student loan interest of $2,700
In this example, the federal student loan interest deduction is fully phased out as federal MAGI exceeds $175,000, the amount at which the deduction is completely phased out for joint filers. Therefore, the taxpayers can only deduct the $800 of undergraduate student loan interest using the Massachusetts student loan interest deduction.
Income Exclusion for Forgiveness of Student Loans
In tax year 2022 and thereafter, Massachusetts excludes from gross income such income that is attributable to the forgiveness of certain student loans pursuant to G.L. 62, § 2(a)(2)(R). Massachusetts also conforms to the federal exclusion of forgiven student loans under Code § 108(f)(5) in effect for the taxable year, which is set to expire after tax year 2025. For tax year 2020 and earlier, a more restrictive version of Code § 108(f)(5) applied, which only excluded discharges of certain student loans on account of death or disability.
Contact for Massachusetts Education-Related Tax Deductions
Phone
9 a.m.–4 p.m., Monday through Friday