You are correct as to the tax treatment in Massachusetts (MA) for your contributions to an IRA. Contributions made while living in MA are not deductible for state income tax purposes. Also, any distributions are tax free on the MA state return up to the amount of your contributions.
If you withdrew 100K from the Inherited IRA in 2024, this would be taxable in full if it was an IRA that was not set up in MA and therefore never had any tax paid on the contributions. The key is whether the decedent was a MA resident who paid tax on all the contributions.
- You would use (a) below if the decedent did not lived in MA while contributing:
- (a) treat the prior contributions on the Line 2 worksheet as "$0" because the IRA I withdrew from has no MA contributions? Meaning, I'm tracking these by IRA (is possible...).
(b) treat the prior contributions on Line 2 worksheet as $50K. Meaning, it's one big IRA pool...
MA IRA Distributions Rules:
If you're a Massachusetts resident but also a beneficiary of a non-Massachusetts IRA, the entire IRA distribution is taxable since no Massachusetts tax was ever paid on the contributed income.
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