Massachusetts adjusted gross income is Massachusetts gross income minus certain allowable federal deductions such as alimony paid*, moving expenses, and student loan interest paid, etc.
*Prior to 2018
|Calculating Massachusetts AGI|
|Form 1, Line 10|
|+||Schedule B, Line 35 (interest, dividends, and short-term capital gains)|
|+||Schedule D, Line 19 (long-term capital gains)|
|-||Schedule Y, Lines 2 - 10|
|-||Schedule B adjustments|
|-||Schedule D adjustments|
However, Schedule Y, Line 4 is an exception in that those amounts are not included in Massachusetts gross income.
If you're a nonresident, calculate your Massachusetts AGI as if you were a full-year resident. Include Massachusetts gross income from all your sources.
Federal deductions allowed on Massachusetts Schedule Y
Claim these allowed federal deductions on Schedule Y, Lines 2 through 10.
- Alimony paid
- Attorney fees and court costs involving certain unlawful discrimination claims
- Certain business expenses of National Guard and Reserve members
- Certain business expenses of qualified performing artist
- Certain business expenses of state and local government officials
- Contributions by certain chaplains to I.R.C. § 403(b) Plans
- Deductible expenses related to income from renting personal property for profit
- Employee business expenses
- Health Savings Account (HSA) deduction
- Jury duty pay remittance
- Medical Savings Account (Archer MSA) deduction
- Moving expenses
- Penalty on withdrawing savings early
- Reforestation amortization and expenses
- Repayment of supplemental unemployment benefits
- Self-employed health insurance deduction
- S Corporation Shareholder SEP, SIMPLE, and Qualified Plans allowed under I.R.C. § 404
- Federal student loan interest deduction
Federal deductions not allowed on Massachusetts Schedule Y
- Attorney fees and court costs related to IRS-detected tax law violations:
Federally, you may deduct attorney fees and court costs paid in connection with an award from the IRS for information provided that helped the IRS detect tax law violations, up to the amount of the award includible in gross income. Massachusetts does not allow this deduction.
- Contributions to I.R.C. § 501(c)(18)(D) pension plans
- Deductible part of self-employment tax:
Federally, you're allowed a deduction equal to half of self-employment taxes you paid. Since you can claim these payments as a deduction up to $2,000 on either Massachusetts Form 1 or 1-NR/PY, the IRS deduction is not allowed for Massachusetts purposes.
- Domestic production activities deduction:
Federally, you can deduct a percentage of qualified production activities income for the taxable year. Massachusetts does not allow this deduction.
- IRA deduction:
Federally, you may deduct contributions to an IRA if you meet certain criteria. This includes any amount contributed to a 501(c)(18) plan. Massachusetts does not allow this deduction.
- Contributions to self-employed SEP, SIMPLE, and qualified plans:
Federally, sole proprietors and partners may deduct contributions made to these plans for themselves. Massachusetts does not allow this deduction for those who are self-employed. Since S corporation shareholders are not self-employed individuals, they are considered employees and therefore do not need to add back the amount of contributions.
- Any deduction related to income not included in Massachusetts gross income:
For example, Medicare deducted from social security benefits is not allowed since the benefits are not included in Massachusetts gross income.
- Depreciation bonus deduction:
Federally, you're entitled to an additional first-year depreciation deduction equal to a percentage of the adjusted basis of "qualified property" you got by a certain date. Massachusetts does not adopt this additional depreciation deduction.
- Forfeitures due to premature withdrawal of funds deduction
- Life tenant income beneficiaries deduction:
Massachusetts does not allow any deduction relating to life tenants and income beneficiaries of property.
- Losses from the sale or exchange of property:
The IRS allows limited excess capital losses over capital gains that you may apply against other income, as well as unused capital losses as capital losses in the following years. Massachusetts does not allow these federal special capital loss treatments.
- Net operating loss deduction:
Massachusetts does not allow the federal treatment of carrying back or carrying forward any unused net operating loss.
- Ordinary income portion of a lump sum distribution deduction:
The IRS allows an averaging election, which taxes the year's distributions received at a reduced rate. This distribution reporting method is not available in Massachusetts. Massachusetts taxes the full distribution shown on U.S. Form 4972, not the reduced amount of distribution reported on U.S. 1040.
- Political deductions:
For Massachusetts purposes, political deductions that are not allowed:
- Any amount paid or incurred in connection with either influencing legislation
- Participating in any political campaign for or against any public office candidate
- Attempting to influence the general public regarding elections or legislative matters
- Communicating directly with an executive branch official to try to influence them
- Qualified stock bonus and profit sharing plan deduction
- S corporation deduction (taxed as a corporate trust)
- State legislators' travel expenses away from home deduction
Page updated: March 2, 2020