Please look at page 20 of the MA Instructions for the Schedule X instructions. It says, "Complete the Schedule X, Line 2 Worksheet to calculate the taxable portion of any amount you received from an Individual Retirement Account (IRA), Keogh, qualified charitable IRA distribution or Roth IRA conversion distribution." Looking at it one way, it would make sense to not include the HFD here because it is not taxable in MA.
However, in looking at the Schedule X Line 2 worksheet (top of center column), the instructions for line 1 of the worksheet says, "Total IRA/Keogh plan distributions, qualified charitable IRA distributions, Roth IRA conversion distributions received during 2022". It says, "total", not "taxable". The taxable amount is calculated from the worksheet, and the worksheet starts with the total IRA distributions. So the result of the worksheet is logically the total IRA distributions, not the taxable amount, not matter what it says elsewhere.
As you can see, HFDs are not mentioned anywhere. MA has an issue with its documentation. We all agree that HFDs are not taxable in MA, the issue is how to report it. The MA DOR told me to report the HFD amount on Schedule Y. Of course, the instructions for Schedule Y don't mention HFDs either.
If you are disputing my statement that TurboTax is doing what the MA instructions literally said, I stand by that statement. The problem is not TurboTax, it is that the MA instructions are deficient.
If you do your return by adjusting Schedule X, you get a good result. If you do it the way that the MA DOR said, you also get a good result by adjusting Schedule Y. I imagine that both methods will be accepted by the state for the time being (until such point as they update their documentation).
In either case, I congratulate you for understanding your tax return well enough that you caught this and pointed it out to us.
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