I am completing 2024 Federal and MA Tax Return, and have a few points I'd like to check on with our experts here - thanks in advance 🙂
(1) I "believe" I understand the principle here for MA Schedule X, Line 2:
- Because MA does not allow deductions for IRA contributions, they don't tax withdrawals until the amount withdrawn exceeds those contributions that were previously taxed by MA.
(2) So we need to have a record of contributions made in the context of MA Income Tax filings, so those can be excluded from MA taxation when withdrawn. Those contributions should be found on prior tax statements.
(3) I think that for MA purposes, it doesn't matter if IRA contributions were "pre-" or "post-" (federal) tax, because in either case MA did not allow a contribution deduction, and will tax them on withdrawal once the withdrawals exceed the total contributions while in MA.
SO.... presuming I got this much right, I'm left with a question of withdrawals from various IRAs. For example
- I have a Traditional IRA, some of which was contributed while filing MA taxes (mostly post, perhaps some pre-tax)
- I have an Inherited IRA, for which I've previously taken an RMD (required as decedent had not in that year), and in 2024 I took a distribution (on course to distribute all within my 10-year period).
- I have a small Roth IRA as well.
(4) Now the big question. When I take withdrawals (as I did from the Inherited IRA this year), do I need to account from *which* IRA I am withdrawing, or are all these all lumped within one big pool? Just to make an example, presume:
- I withdrew 100K from the Inherited IRA in 2024
- And all my prior year IRA contributions (within the MA context) was 50K
- Would I:
- (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...
- Seem's I'm advantaged to take path (b) as it reduces the taxable distribution in the current year - but it's not clear to me how to handle this.
Clarification *very* welcome here - Thank You.
