An explanation of whether or not IRA distributions are taxable in Massachusetts:
Massachusetts does not recognize the deductibility of contributions that you make when you put money into an IRA and as a result, in the year of the contribution, while you are not then taxed by the Federal government, you do have to pay tax on the earnings to Massachusetts. The monies you contribute over the years sum up to what is known, in this case, as the Basis in your IRA. Think of it another way, it is the invested principal.
When you have distributions from the IRA, all of the monies withdrawn are liable to Federal taxation. However, Massachusetts views the monies being withdrawn as first being your Basis or Principal, and until you have withdrawn the entire amount of Basis that you contributed, you are not liable for Massachusetts tax on the IRA distributions, only when you "start" withdrawing earnings - meaning what is left after you have deducted all the money you contributed in.
So, you need to have a record of how much you contributed into the IRA in order to be able to answer the questions of how much of the IRA distribution was previously taxed. IF, as an example, you have been taking distributions for some number of years, it is likely that you will have finally reached the point where none of the distribution should be excluded; on the other hand, in the first year or first years, all or most of the distribution is likely to be only Basis or principal and not subject to Massachusetts taxation.
See the image for an example where the total contributions made over the years was $100,000 and in prior years you would have distributed $65,000, thus the total now would come to $70,500 and still not have exhausted the principal so none of this year's distribution should be taxable in Massachusetts.
See second image showing the actual MA Form 1 Schedule X and the exclusion of the IRA distribution from tax.
If this posted response is useful to you, please click on the upraised hand in the lower left of this post. Thank you. Scruffy Curmudgeon--PFFM/ IAFF, retired FireFighter/Paramedic - Locals 718/30, Veteran USAR O3 AIS/ASA '65-'67
NOT INTUIT EMPLOYEE
USAR 64-67 AIS/ASA MOS 9301 - O3
- Just donating my time
**Say Thanks by clicking the thumb icon in the lower left corner -it means nothing but makes those than answer feel wanted.
