How to Calculate
To calculate how much tax you owe, first calculate your Massachusetts gross income. Massachusetts gross income is federal gross income:
- Plus income excluded from federal income but included in Massachusetts income
- Minus income included in federal income but excluded from Massachusetts income, and
- Minus income excluded from both federal income and Massachusetts income.
Next, check what income you included in your Massachusetts gross income that you're supposed to deduct on the appropriate Schedule, and then deduct the income.
Then, divide your Massachusetts gross income into 3 parts:
- Part A income (Schedule B) - Total interest, dividends and certain capital gains and losses
- Part B income (Form 1 or Form 1-NR/PY) - Massachusetts gross income not included in Schedule B or D
- Part C income (Schedule D) - Long-term capital gain income.
| Part A income (Schedule B) |
Part B income (Form 1 or Form 1-NR/PY) |
Part C income (Schedule D) |
|---|---|---|
| Gross income (interest, dividends, and certain capital gains/losses) | Income not included in Schedule B or D | Long-term capital gains and losses, excluding collectibles |
| - MA adjustments/offsets | - Federal deductions (Schedule Y, Lines 1-10) |
- MA adjustments/offsets |
| = MA adjusted gross income (Schedule B, Line 35) |
= MA adjusted gross income | = MA adjusted gross income (Schedule D, Line 18) |
| - MA deductions (Form 1, Lines 11-14 or Form 1-NR/PY, Lines 11-16, and Schedule Y, Lines 11-16) |
||
| - MA exemptions | - MA exemptions | - MA exemptions |
| = MA taxable Part A income | = MA taxable Part B income | = MA taxable Part C income |
| × Tax rate | × Tax rate | × Tax rate |
| = Income tax | = Income tax | = Income tax |
Combine Part A income tax, Part B income tax, and Part C income tax to get your total income tax.
| Calculating your tax due | |
|---|---|
| Total income tax | |
| - | Personal income tax credits |
| = | Income tax after credits (not below 0) |
| + | Voluntary contributions |
| + | Use tax due |
| + | Health care penalty |
| - | Estimated tax |
| - | Penalty for void extension |
| - | Withholding |
| - | Earned Income Tax Credit (EITC) |
| - | Refundable Circuit Breaker credit |
| = | Tax due (or overpayment) |
Massachusetts Gross Income
| Calculating Massachusetts gross income | |
|---|---|
| Federal gross income (Form 1, Line 10 or Form 1-NR/PY, Line 12 for part-year residents and nonresidents) | |
| + | Income excluded from federal but included in Massachusetts |
| - | Income included in federal but excluded from Massachusetts |
| - | Income excluded from both federal and Massachusetts |
| = | Massachusetts gross income |
Residents - Include gross income from all sources, both in and out of Massachusetts.
Part-year residents - Include gross income from all sources during your residency period.
Nonresidents - Include gross income from sources in Massachusetts. This includes income related to:
- Any trade of business, including any employment you carried on in Massachusetts, whether or not you actively engaged in a trade, business, or employment in Massachusetts in the year you received the income
- Participating in any lottery or wagering transaction in Massachusetts
- Owning (or having any interest in) real or tangible personal property in Massachusetts
- Interest and gains from trade or business conducted in Massachusetts.
Federal gross income
Federal gross income includes (but is not limited to):
- Alimony and separate maintenance payments
- Annuities
- Compensation for services, including fees, commissions, fringe benefits and similar items (W-2 wages)
- Distributive share of partnership gross income
- Dividends
- Gains derived from dealings in property
- Gross income derived from business
- Income from life insurance and endowment contracts
- Income from discharge of indebtedness
- Income in respect of a decedent
- Income from an interest in an estate or trust
- Interest
- Pensions
- Rents
- Royalties.
Income excluded from federal but included in Massachusetts
- Amounts included in or considered Massachusetts gross income
- Income you earned abroad as a Massachusetts resident - This is added back to get Massachusetts income.
- Employee contributions to a qualified Massachusetts pension plan - This is added back to get Massachusetts gross income. The maximum allowed deduction is $2,000 per taxpayer, and the payments added back are reflected in Form W-2, Box 16. This amount will be more than the amount shown as Federal wages in Box 1 of the W-2.
- Interest income from state and local obligations (other than Massachusetts) - Subtract these amounts on Massachusetts Schedule B, Line 6.
Income included in federal but excluded from Massachusetts
- Massachusetts trust income you received from any taxable trustee or fiduciary
- Payments from the Air Transportation Safety and System Stabilization Act
- Pension income from an employee Massachusetts and U.S. government contributory plan
- Pension income from a U.S. military non-contributory pension plan - This includes pensions or survivorship benefits from the:
- Army
- Navy
- Marine Corps
- Air Force
- Coast Guard
- Commissioned corps of the Public Health Service
- National Oceanic and Atmospheric Administration.
- Previously taxed contributions (income) from annuity, stock bonus, pension, profit sharing plans, and IRAs - Only the distribution amounts over the previously taxed income are taxable.
- Qualified disaster relief payments you received - Exclude, from Massachusetts gross income, payments to:
- Reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred due to a qualified disaster
- Reimburse or pay reasonable and necessary expenses incurred for repairing or rehabilitating a personal residence, or repairing or replacing its contents, due to a qualified disaster
- Someone furnishing or selling transportation as a common carrier due to death or personal physical injuries from a qualified disaster, or
- Payments from the United States or a state or local government, or their agencies, related to a qualified disaster in order to promote the general welfare, but only to the extent that any expense compensated by such payment is not compensated for by insurance or otherwise.
- Debt relief income for terrorist victims - Exclude income that is for relieving debts that you took on as a result of:
- The terrorist attacks against the United States on September 11, 2001, or
- Illness from an anthrax attack that occurred on or after September 11, 2001, and before January 1, 2002.
- Social Security benefits
- State tax refund
Income excluded from both federal and Massachusetts
Additional Resources
Massachusetts Adjusted Gross Income
| Calculating Massachusetts AGI | |
|---|---|
| Federal gross income (Form 1, Line 10 or Form 1-NR/PY, Line 12 for part-year residents and nonresidents) | |
| + | Schedule B, Line 35 (interest, dividends, and short-term capital gains) |
| + | Schedule D, Line 19 (long-term capital gains) |
| - | Schedule Y, Lines 1 - 10 |
| - | Schedule B adjustments |
| - | Schedule D adjustments |
| = | Massachusetts AGI |
Your Massachusetts AGI affects:
- No Tax Status (NTS) – Fill out the Massachusetts AGI worksheet (Schedule NTS-L-NR/PY if you're a part-year resident or nonresident). If you're required to file, you may still qualify for this status depending on your Massachusetts AGI.
- Limited Income Credit (LIC) – Fill out the Massachusetts AGI worksheet (Schedule NTS-L-NR/PY if you're a part-year resident or nonresident). If you're required to file but do not qualify for NTS, you may still qualify for this credit depending on your Massachusetts AGI.
Additional Resources
Massachusetts Taxable Income
This taxable income is what’s used to figure out actual tax due. Your Massachusetts taxable income is your Massachusetts adjusted gross income minus the following deductions:
- Massachusetts deductions on Form 1 (Lines 11-14) and Form 1-NR/PY (Lines 11-16):
- Deductions on Schedule Y (Lines 11 – 16):
- Massachusetts personal income tax exemptions
Additional Resources
Income Divided into 3 Parts
After adjusting your Massachusetts gross income by adding or subtracting items, divide your Massachusetts gross income into 3 parts:
1. Part A (Massachusetts Schedule B) income is total interest, dividends and certain capital gains.
Included in Part A income:
- Current year short-term capital gains (including collectibles)
- Long-term capital gains on collectibles and pre-1996 installment sales
- Gains on the sale of property used in a trade or business (4797 property) held for 1 year or less
Excluded from Part A income:
- Interest from savings deposits in Massachusetts banks
- Interest from loans made by pawn brokers
2. Part B (Massachusetts Form 1, Line 10 or Form 1-NR/PY, Line 12) income is Massachusetts gross income not included in Schedule B or D.
Included in Part B income:
- Interest from savings deposits in Massachusetts banks
- Interest from loans made by pawn brokers
- Wages
- Salaries
- Pensions
- Business income
- Rental income
- Alimony and winnings
- Etc.
3. Part C (Massachusetts Schedule D) income is long-term capital gain income.
Excluded from Part C income:
- Long-term capital gains from collectibles
- Long-term capital gains from pre-1996 installment sales
After getting your Part A, Part B, and Part C income, adjust each category of income to calculate Part B, Part A and Part C adjusted gross income, and finally calculate Part B, Part A and Part C taxable income.
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
Contact for Massachusetts Gross, Adjusted Gross, and Taxable Income
Phone
Tax Department
Call DOR Contact, Tax Department at (617) 887-6367
Toll-free in Massachusetts
Call DOR Contact, Toll-free in Massachusetts at (800) 392-6089
9 a.m.–4 p.m., Monday through Friday