Non-taxable state income from taxable w-2 income at federal level

[51mary]

In Massachusetts, the state allows up to $1500 earned  through the Senior Tax Work Off program as non-taxable income. However, the same $1500 is taxed at the federal level. Since a wW2 is issued to file with the federal IRS,  how do I prevent Turbo-Tax from including the $1500 as taxable income at the state level?

[CatinaT1]

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[51mary]

My problem has not been resolved. TurboTax has a flaw in that it does not allow state level non-taxable w-2 income to be excluded in Form 1 of the Massachusetts Income Tax program. I already spent 2 hours on the phone last week with 3 different people from TurboTax. One of your CPA's called me on Sunday night (Palm Sunday) claiming she has a temporary work-around for me and wants me to allow her to change my tax return to temporarily fix the problem. She refuses to email me the instructions so I can make the change myself. I think TurboTax needs to provide a permanent update to the software to recognize the Massachusetts Senior Tax Work Off W-2 income as non-taxable. As of today, TurboTax still automatically inputs all W-2 income from the Federal forms into the Massachusetts Form 1. At this point, I will have to file my state manually with hard-copy forms. I think TurboTax owes me a refund. I don't know how many Massachusetts filers are impacted, but I do know that thousands of seniors participate in the Senior Tax Work Off Program.  PLEASE DIRECT MY REPLY TO THE INTUIT PROGRAMMERS TO FIX THIS ASAP.  The following info is directly from the Massachusetts website - For state income tax purposes, the earned property tax credit is not considered income. However, the IRS has ruled that the credit, in the form of an abatement, are wages subject to federal income tax and Medicare withholdings. - Here is the website link - Highly Recommended: Tax Work-Off | Mass.gov

[AmyC]

Since you have talked to people, the best I can do is give you a workaround. File the federal return, make sure it is accepted. Save a copy of your return. Delete the w2, file your state return.

[FranD1]

I am having the same exact problem with my 2024 Massachusetts return. Has this not been resolved in the software? Will I have to

follow this suggestion and file my federal return first, wait until it’s accepted, and then delete the W-2 info in order to file my state return separately?

[FranD1]

Did you ever get any satisfaction (refund?) from TurboTax? I’m having the same problem this year…

[51mary]

Hi Fran, there is a way to record your Massachusetts Senior Tax Work Off income on the Federal Return as income and then a special entry on your State return so the money does not get taxed as income at the State level; so you can file both Fed and State at the same time. It will take me some time to locate how I recorded this for tax year 2023 and see if it is the same is acceptable for tax year 2024. I know Mass doesn't tax this income. Last year, I figured it out before the Turbo Tax rep. The Turbo Tax rep said they were NOT changing their software. Anyway, I will get back to you when I find how I handle this last year and see if the same option is available this year. Sincerely, Mary

[51mary]

Hi Fran, I found it. On Massachusetts SCHEDULE Y "Other Deductions" for 2024 on LINE 9A - "CERTAIN QUALIFIED DEDUCTIONS FROM U.S. FORM 1040". Enter your Massachusetts Senior Tax Work Off income on this line so it is not taxed by the State. Sincerely, Mary.