Massachusetts Deductions-Subtractions from Income
If you paid adoption fees to a licensed adoption agency during 2016, you are eligible for an exemption of the total amount of the fees paid during the year. Fees paid during 2016 to an agency licensed to place children for adoption on account of the adoption process of a minor child regardless of whether an adoption actually took place during 2016 should also be included for this exemption.
Income Excludible under MGL Ch. 41, Sec. 111F
Massachusetts allows an exclusion from income of amounts received by a firefighter or police officer incapacitated in the line of duty, per MGL Ch. 41, sec. 111F.
U.S. Tax Treaty
Massachusetts allows an exclusion from income of amounts received by qualifying students and taxpayers exempt under a U.S. tax treaty.
Claim of Right Deduction
Taxpayers who have paid Massachusetts personal income taxes in a prior year on income attributed to them under a “claim of right” may deduct the amount of that income from their gross income if it later develops that they were not in fact entitled to the income, and have repaid the amounts in question. The deduction is allowed in the year of repayment, provided that the repayment is not otherwise deductible in determining Massachusetts income taxable under M.G.L. ch. 62. Some examples in which the claim of right may be applied for are:
* Stock under claim of ownership. Gains from sales of stock under a claim of ownership must be included, regardless of whether the taxpayer actually owned it;
* Employment contracts. Amounts in settlement of employment contracts must be included notwithstanding the prospect of eventual repayment to the employer of an amount equivalent to or greater than the amount received;
* Dividends. Where a taxpayer receives a dividend that must be repaid in a later year (e.g., because it impaired corporate capital), the dividend must be included in the year of receipt;
* Corporate notes. Where a taxpayer receives a distribution with respect to holding of notes, the income must be included regardless of whether it could be challenged by senior creditors;
* Mistake in validity of claim. The claim of right doctrine applies where a taxpayer merely mistakes the validity of his claim; or
* Advanced insurance commissions. If you are entitled to claim this deduction, enter the amount claimed in Schedule Y, line 14. For more information, see TIR 06-4.
A deduction is allowed for certain amounts paid by an individual for tolls paid for through a E-Z Pass account or for weekly or monthly transit commuter passes for MBTA transit, bus, commuter rail or commuter boat, not including amounts reimbursed or otherwise deductible.
In the case of a single person or a married person filing a separate return or a head of household, this deduction applies only to the portion of such expended amount that exceeds $150, and the total amount deducted cannot exceed $750. In the case of a married couple filing a joint return, this deduction applies only to the portion of such amount expended by each individual that exceeds $150, and the total amount deducted cannot exceed $750 for each individual. Also, one spouse cannot transfer his or her excess deduction to the other spouse.
The deduction is allowed where an individual purchases an MBTA pass for a dependent who is claimed on that individual's tax return, provided the dependent does not also claim the deduction. However, the total amount deducted cannot exceed $750 for each individual taxpayer who is filing a return. In the case of married taxpayers filing a joint return, the total amount deducted cannot exceed $750 per taxpayer; thus, the maximum deduction for a joint return is $1,500.
Amount Paid to Social Security (FICA), Medicare, Railroad, U.S. or Massachusetts Retirement Systems
If you have paid into any of the retirement systems listed above during 2016, you may deduct those contributions, up to a maximum of $2,000 per person.
Massachusetts allows a deduction for contributory pension income received from another state or one of its political subdivisions which does not tax such income from Massachusetts or its political subdivisions.
Undergraduate Student Loan Interest Deduction
A deduction is allowed for interest paid on a qualified undergraduate student loan. To be eligible for the deduction, the "education debt" must be a loan that is administered by the financial aid office of a two-year or four-year college at which you, or a qualified dependent, were enrolled as an undergraduate student. Additionally, the loan must have been secured through a state student loan program, a federal student loan program, or a commercial lender, and must have been spent solely for the purposes of paying tuition and other expenses directly related to the school enrollment.
Note: This deduction is only allowed if not claiming the same expenses in line 12 of Schedule Y, Student Loan Interest Deduction.
Child under Age 13, or Disabled Dependent/Spouse Care Expenses
Massachusetts allows taxpayers to exceed the federal limit on employment-related expenses for the care of a qualified child under the age of 13, a disabled dependent or a disabled spouse. The maximum deduction is $4,800 for one qualifying individual, and $9,600 for two or more qualifying individuals.
Note: You cannot claim this deduction if married filing a separate U.S. 1040 or 1040A return. If you are filing a joint U.S. 1040 or 1040A return but are married filing separately for Massachusetts purposes, either spouse may claim the deduction for expenses he or she incurred, but their combined deduction cannot exceed $4,800 for one qualifying individual or $9,600 for two or more qualifying individuals.
**This is automatically calculated based on the dependents and Federal Form 2441. If you also have an entry for "Dependent Member(s) of Household under Age 12, or Dependents Age 65 or Over (not you or your spouse), or a Disabled Dependent" our program will calculate both and use the better of the two. (see below)**
Dependent Member(s) of Household Under Age 12, or Dependents Age 65 or Over (not you or your spouse), or Disabled Dependent
You may deduct $3,600 for a dependent member of household, or $7,200 for two or more dependents, under age 12, or dependent age 65 or over (not you or spouse) as of December 31, 2016, or disabled dependent.
Note: You cannot claim this deduction if married filing a separate return.
**To enter information for the deduction for dependents under age 12, Disabled or Age 65 or Older, complete the information in the program. Our program will calculate both the "Child under age 13" deduction as well as this deduction, and then use the better of the two entries automatically.**
You may be entitled to a rental deduction equal to one-half (50%) of the rent you paid during 2016 (up to a maximum of $3,000 per return) for your principal residence in Massachusetts. Enter the total amount of qualified rent paid by you during 2016 in line 14a. Divide line 14a by 2 and enter the result, or $3,000 ($1,500 if married filing a separate return) — whichever is smaller — in line 14.
Note: This deduction amount does not apply to your U.S. tax return.
What Qualifies for the Rental Deduction - The deduction must be for rent you paid to a landlord for the rental or lease of your principal residence in Massachusetts. If two or more persons jointly rent a unit, each occupant using it as his/her principal residence is entitled to a deduction based on the amount of rent that each person paid.
If the rent is paid by a third party (such as a parent) who maintains a principal residence elsewhere, no 50% rental deduction is allowed for either party.
A principal residence does not include any residence for vacation, an apartment for a person on a temporary assignment or a student or faculty member who has a principal residence elsewhere. It also does not include any apartment or house in Massachusetts of a nonresident who has a legal residence in another state or country.
Payment for occupying a hotel, motel or rooming house is not considered rent unless a rental agreement exists. All separately stated charges such as utilities, furnishings or parking cannot be included in rent for purposes of this deduction. Also, rent does not include any advance payments (such as security deposit, last month’s rent, etc.) until actually applied as rent.
How Do I Calculate My Rental Deduction If I Am Married Filing Separately - If a husband and wife file separate returns, they are each entitled to a rental deduction equal to 50% of the rent each pays, not to exceed $1,500 per return. However, a married couple filing separately may allocate the rent deduction differently, provided the amount taken by each spouse does not exceed 50% of the rent actually paid by that spouse, and provided their combined rental deductions do not exceed $3,000. If the allocation results in one spouse claiming a deduction in excess of $1,500, that spouse must enclose with his/her return a statement signed by the other spouse indicating consent to the allocation. The statement must contain the name, address and SSN of the consenting spouse and the amount of rental deduction taken by that spouse.
College Tuition Deduction
A deduction is allowed for tuition payments paid by you, for yourself or a dependent, to a qualifying two- or four-year college leading to an undergraduate or associate’s degree, diploma or certificate. Note: Tuition payments for students pursuing graduate degrees at such a college or university are not eligible for the college tuition deduction.
The deduction is equal to the amount by which the tuition payments, less any scholarships, grants or financial aid received, exceed 25% of Massachusetts Adjusted Gross Income.
Deduction for Expenses of Human Organ Transplant An individual may deduct certain expenses and other costs incurred in the process of donating an organ for a human organ transplant to another individual. Includes travel expenses; (ii) lodging expenses; and (iii) lost wages not to exceed $10,000. An individual who is a nonresident of Massachusetts for all or part of the taxable year is not eligible to claim this deduction.
Certain Gambling Losses Massachusetts has adopted a new deduction from 5.1% income, allowing a deduction for losses from wagering transactions, that were incurred at a gaming establishment licensed in accordance with chapter 23K or a racing meeting licensee or simulcasting licensee, only to the extent of the
gains from such transactions.
Health Savings Accounts Enter in Schedule Y, line 8 the amount from U.S. Form 1040, line 25.
Alimony Paid Enter in Schedule Y, line 3 the total amount that you paid to your former spouse during 2016 for alimony or separate maintenance under court decree.
Allowable Employee Business Expenses
Generally, reimbursed employee business expenses are not included in your wages or salary and therefore are not allowed as deductions. However, there are unreimbursed and certain reimbursed expenses for which you are allowed a deduction. Complete the Schedule Y, Line 1 Worksheet in order to calculate your Massachusetts employee business expense deduction. The expenses must relate to income reported in lines 3 or 9 on Form 1.
Note: All expenses must be documented upon request.
Employees may deduct the following:
* unreimbursed travel and transportation expenses including lodging and meals away from home incurred by an employee
* all federally deductible unreimbursed employee business expenses, if the employee is a salesperson who solicits business for an employer away from the employer’s place of business.
Unreimbursed expenses are only deductible if all of the following conditions are met:
* you itemize deductions;
* if you filed a joint U.S. return, you must file a joint Massachusetts return;
* your unreimbursed business expenses taken together with the other miscellaneous itemized deductions reported on U.S. Form 1040, Schedule A, lines 21, 22 and 23 exceed 2% of your federal adjusted gross income reported on U.S. Form 1040, Schedule A, line 26