My collect student earned $10,800 in 2023. The MA State return shows they owe taxes. Is this correct? I expected them to be exempt.

[maglib]

@MA Mom   does your son live in MA or a non-resident? Is he still your legal dependent?

The MA single exemption is only $4,400 in 2023 plus if he can claim himself and additional $1,000 plus either you or him can claim the tuition deduction

College Tuition Deduction (Non-residents and part year residents are ineligible for the college tuition deduction)

Massachusetts allows a deduction for tuition payments paid by taxpayers for themselves, and their dependents who attend a qualifying two or four-year college leading to an undergraduate or associates degree, diploma, or certificate. To qualify as a dependent for purposes of this deduction, the individual must be a “dependent” as defined by Internal Revenue Code (“Code”) § 151(c) as in effect on January 1, 2022.

The deduction is equal to the amount by which the tuition payments, less any scholarships, grants, or financial aid received, exceed 25% of the taxpayer's Massachusetts adjusted gross income

[MA Mom]

Thank you.

Yes, she lives with us in MA when not on campus.

We claim her as a dependent - she cannot support 1/2 of her living expenses, which means she cannot claim the Tuition deduction.  In the past we got that deduction, but got a pay raise (yay!) which effectively just netted to nothing because TT is now saying we are not able to claim the Tuition expense deduction. :(

Seems we're stuck with her owing State taxes, and no one being able to claim the tuition deduction.

Is there anything I'm missing?

[maglib]

@MA Mom   while you can claim her, you are not required to if there is no benefit.   She can then do the interview saying she can be claimed by someone else but, was not.

If you get no benefits of education credits, there is no reason she can not claim education expenses from the 1098-t and She can get the nonrefundable portion only of the Federal tuition credits.  I'm not sure on MA..

Try it both ways.

[DawnC]

She can claim the tuition deduction.  The MA tuition deduction differs from the federal education credits; the dependent can claim the deduction in MA since she was a full year resident.   Temporary absences (for school, work, military, or medical care) count as time lived at home.  

Massachusetts allows a deduction for undergraduate tuition if the total paid exceeds 25% of the taxpayer's Massachusetts adjusted gross income. Qualified expenses include only those expenses designated as tuition or mandatory fees required for enrollment at an eligible educational institution.

The deduction is equal to the amount by which the tuition payments, less any grants, scholarships, and financial aid received, exceed 25% of the Massachusetts AGI.

For more information, go to the Massachusetts Resident Income Tax Form 1 Instructions, page 21.

[TomD8]

@MA Mom --

To answer your original question: MA residents are required to file an MA tax return if their gross income from all sources exceeds $8,000.  There is no exemption for students.