Inlaw in nursing home in Mass. all her income goes to MassHealth. She still has to pay Mass State tax on her 14K pension. Does she have to pay since all goes to them?

[ThomasM125]

The income is still hers even though she is paying it over to the nursing home. She may get an itemized deduction for medical expenses for the portion of the payments that involve medical care, which may be the whole sum if that is the primary reason she is there. So, prepare her tax return and enter the nursing home expenses as medical expenses in the Deductions and Credits section, then Medical, then Medical expenses on her federal return. They will flow down to the state return and reduce or eliminate taxable income there.