How do I get Turbo Tax to change my Roth IRA to nontaxable on my state return?

[rmolyneaux]

It is not taxable on the federal return but it shows as taxable on the state return.

[MaryK4]

Can you clarify which state?  @rmolyneaux 

[rmolyneaux]

Massachusetts

[JohnB5677]

In the MA program, you must enter the contributions previously taxed by Mass. If you cannot prove the amount, it is zero. If you have old tax returns or financial documents, you may be able to determine the amount taxed. 

The state of MA has very different laws than the federal regarding IRAs and is much more complicated. The Jan 2023 update of MA treatment of Roth states: Further, Massachusetts allows a deduction for the portion of IRA distributions that were previously subject to Massachusetts personal income tax. The distributions are deducted from Massachusetts gross income to the extent that the aggregate amount deducted equals the aggregate amount previously included in Massachusetts gross income. 

This means you must be able to show what has been taxed and the remainder is taxable. Income to the decedent is income to you.  Enter the amount you know has been taxed and can prove, in case of audit. Best case would be if you could determine all contributions and distributions to enter here.

See Original Post     @AmyC  @rmolyneaux 

[dklay]

It is now 2025 and I'm going through my 2024 taxes. My wife inherited a Roth IRA when her father passed in 2021. He lived in Arizona. We live in Massachusetts. The Roth IRA was moved to a Massachusetts based account in 2021 when inherited. She took a full distribution of the account in 2024.

TurboTax is saying it is nontaxable for Federal, but taxable in Massachusetts. Is this correct? If it should be nontaxable in MA, how to I tell TurboTax to do that?

[dklay]

I think I figured it out, but please tell me if I'm wrong....

That original Roth IRA was in Arizona well before 2020, therefore created from Non-Massachusetts income. So, In schedule X section 1, Line B I entered the full amount as Non-Massachusetts portion of the IRA distribution.

[MonikaK1]

If the amounts distributed from the inherited IRA were never taxed in Massachusetts, then they are taxable on a Massachusetts return upon distribution. According to this Massachusetts webpage: 

Included in your Massachusetts gross income for the year paid:

• Contributions you made to a traditional IRA plan. For federal purposes, you can claim either all or part of the contribution as a deduction on U.S. Form 1040 if certain criteria are met. However, Massachusetts does not allow a deduction for these contributions.
• Distributions from an IRA account made to you. For Massachusetts purposes however, distributions made are excluded from gross income if these distributions equal your Massachusetts previously taxed contributions. 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.

@dklay