Yes, the Massachusetts (MA) return should tax only the $700 gain. Either put only $700 in the MA state field on the federal return (1099-R). You can use the federal EIN for the state if there isn't one, but do not enter any dash or letters. Or when you are in the MA return, watch for a screen where you can make an adjustment.
Differences Between MA and Federal Tax Law
- Roth IRA Contributions are not deductible for either Massachusetts or federal purposes.
- Roth IRA Distributions in excess of contributions are excluded from federal income if certain age and holding period requirements are met. Such distributions are excluded from Massachusetts income to the extent that they are excluded from federal income.
@Neal10
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