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Category: Massachusetts

Massachusetts Schedule B

Interest, Dividends and Certain Capital Gains and Losses

You must file Massachusetts Schedule B if you had:

  • Dividend income in excess of $1,500
  • Any interest income other than from Massachusetts banks taxed at 5.3%
  • Short-term capital gains or losses
  • Carryover short-term losses from prior years
  • Long-term gains on collectibles and pre-1996 installment sales classified as capital gain income for Massachusetts purposes
  • Gains or losses from the sale, exchange or involuntary conversion of property used in a trade or business
  • Net long-term capital gains and losses
  • Excess exemptions

Collectibles are defined as any capital asset that is collectible within the meaning of the Internal Revenue Code section 408(m), as amended and in effect for the taxable year, including works of art, rugs, antiques, metals, gems, stamps, alcoholic beverages, certain coins, and any other items treated as collectibles for federal tax purposes.

You must complete Massachusetts Schedule B if your interest or dividend income includes: dividends taxed directly to trusts or estates on a Massachusetts Fiduciary Return, Form 2; distributions that are returns of capital.

Enter the Amount of Interest not Included on your Federal Return but Taxable to Massachusetts

  • Interest from obligations of other states and their political subdivisions (including your share, if any, from a partnership, an S corporation and a grantor-type trust or non-Massachusetts trust). Do not include exempt interest already included in your Federal interest and dividend income reported on Federal Schedule B.
  • Taxable distributions from Massachusetts S Corporations not reported in your Federal Schedule B. Distributions in excess of the Massachusetts accumulated adjustments account are dividends to the extent of the corporation’s Massachusetts accumulated earnings and profits.
  • Interest and dividends from a partnership, S corporation, grantor-type trust, or non-Massachusetts estate or trust from Massachusetts Schedule E. Generally, portfolio interest and dividend income from partnerships and S corporations should already be included in the Federal Schedule B.
  • Interest from a trade or business that is reported on Massachusetts Schedule C.
  • Interest or dividends from a mutual fund, if such distributions are not included on Federal Schedule B.

Enter the Amount of Interest Included on your Federal Return but not Taxable to Massachusetts

  • Interest on U.S. debt obligations. Enter the interest received on U.S. Treasury Bills, notes and bonds, savings bonds or other obligation of the United States, including its territories or dependencies. Such interest is tax exempt in Massachusetts.
  • Interest and dividends taxed directly to Massachusetts estates and trust. Enter the interest an dividends that are taxed directly to a Massachusetts estate or trust.
  • Any distribution which is a return of capital included in total gross dividends from Federal Schedule B.
  • Any interest or dividends from obligations of the Commonwealth of Massachusetts or its political subdivisions held by you.
  • Any exempt portion of interest or dividends from a mutual fund included in Federal Schedule B additional interest added. Enter only the exempt portion of interest or dividends derived from obligations of the US government or the Commonwealth of Massachusetts or its political subdivisions.
  • Any interest on pre-retirement distributions from state and municipal contributory pension plans.

Do NOT enter either of the following:

  • Dividends from the earnings and profits accumulated prior to January 1, 1971 by any corporate trust which was not taxed directly by Massachusetts in prior years, even though such an entity is taxed directly now (obtain from the entity the taxable status of dividends paid to you); or
  • Dividends from any corporate trust which is not taxed directly by Massachusetts. Such entities include: those not doing business in Massachusetts; regulated investment companies or real estate investment trusts (both as defined under the U.S. IRS Code, Sections 851 and 856); or holding companies (as defined in Massachusetts General Laws, Chapter 62, section 8).

Allowable Deductions from your Trade or Business

Enter the appropriate amount from Massachusetts Schedule C-2 if you qualify for an excess trade or business deduction. Generally, taxpayers may not use excess 5.3% deductions to offset other income. However, where the taxpayer files a Massachusetts Schedule C or Schedule E, Massachusetts law allows such offsets if the following requirements are met: the excess 5.3% deductions must be adjusted gross income deductions allowed under MGL chapter 62, sec 2(d); and these excess deductions may only be used to offset other income which is effectively connected with the active conduct of a trade or business or any other income allowed under IRC sec 469(d)(1)(B) to offset losses from passive activities.

Prior Years Short-Term Unused Losses for Years Beginning after 1981

You may use short-term losses accumulated in the previous taxable years beginning after 1981 in the computation of short-term gain or loss for the current year. Enter here the amount form your prior year Massachusetts Schedule B line 40.

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