|Organization:||Massachusetts Department of Revenue|
|Referenced Sources:||Massachusetts General Laws|
Personal Income Tax
This Technical Information Release explains the retirement plan contribution amounts that may be excluded from an individual's gross income for tax year 2002 for purposes of Massachusetts personal income tax.
Massachusetts follows the Internal Revenue Code ("Code") as of January 1, 1998 for most purposes of the personal income tax. G.L. c. 62, Â§ 1(c). Massachusetts does not adopt any change made since that date unless an exception exists or the Legislature enacts a provision specifying different treatment. Massachusetts allows an individual to exclude from gross income an elective deferral contributed to a retirement plan up to a certain amount determined under the Code. For Massachusetts provisions following the Code as of January 1, 1998, this amount will not reflect the changes made by the federal Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). (Public Law 107-16, enacted on June 7, 2001.) The effect of incorporating the 1998 Code for certain retirement plans is that, in some cases, an individual is not allowed to exclude from Massachusetts gross income the entire amount excludible from gross income for federal income tax purposes.
Treatment of retirement plan elective contributions for tax year 2002 are shown in the table below. Those Massachusetts exclusion amounts based on the January 1, 1998 Code are derived from inflation adjustment calculations and, thus, may increase in future tax years. Also, pursuant to EGTRRA, the federal exclusion amounts and the Massachusetts exclusion amounts tied to the current Code will increase in future tax years.
Massachusetts allows a deduction for the portion of plan distributions that were previously subject to Massachusetts personal income tax. The distributions are deducted from Massachusetts gross income to the extent that the aggregate amount deducted equals the aggregate amount previously included in Massachusetts gross income. G.L. c. 62, Â§ 2(a)(2)(F).
The Massachusetts Legislature is considering whether to adopt current Code treatment for those Massachusetts retirement plan elective contributions currently based on the January 1, 1998 Code. If such legislation is enacted, the Department will issue an updated Technical Information Release that provides the new deferral amounts for 2002.
2002 Income Tax Treatment of Retirement Plan Elective Contributions
|Pension Plan/Code Section||Massachusetts Code Tie-In Date||Federal Exclusion Amount||Massachusetts
Massachusetts Gross Income
|SIMPLE IRA / s. 408(p)||01/01/98||$7,000||$6,500||
|Additional age 50 catch-up
|Massachusetts State and
Deferred Compensation Plan/ s. 457
|Current(i)||$11,000(ii)||$11,000 or same amount allowed federally||0|
|Â§ 457 Plans Other Than
Massachusetts State and
Local Government Plans
|01/01/98||$11,000(iii)||The lesser of $9,000
or 33 1/3%
of employee's compensation(iv)
|Difference between federal
exclusion and Massachusetts exclusion
|Annuity Contract / s. 403(b)||01/01/98||$11,000||In general,
$11,000 (v), (vi)
|In general, 0|
|s. 401(k) Plan; s. 408(k) Salary reduction SEP(vii)||01/01/98||$11,000||$11,000(viii)||0|
|Additional age 50 catch-up
401(k), s. 403(b), s. 408(k) SEP, and
s. 457 Plans