Deductions from Adjusted Gross Income
| TAX EXPENDITURE | FY2008 | FY2009 | FY2010 |
|---|---|---|---|
| Deductions from Adjusted Gross Income | 764.4 | 783.3 | 803.4 |
| item | description | amount |
|---|---|---|
| Deductions from Adjusted Gross Income | 803.4 | |
| 1.401 |
Deduction for Employee Social Security and Railroad Retirement Payments
Taxes paid by employees to fund the Social Security and Railroad Retirement systems are deductible against "earned" income up to a maximum of $2,000 per individual. Comment: The estimate also covers item 1.402 below. The estimate also covers item 1.402 below. Origin: M.G.L. c. 62, S. 3B(a)(3) Estimate: $308.7 |
308.7 |
| 1.402 |
Deduction for Employee Contributions to Public Pension Plans
2
Employee contributions to federal and state contributory pension plans are deductible against "earned" income up to a maximum of $2,000 per individual. Origin: M.G.L. c. 62, S. 3B(a)(4) Estimate: N.A. |
N.A. |
| 1.403 |
Additional Exemption for the Elderly
A taxpayer age 65 or over is entitled to an additional exemption against "earned" income of $700 ($1,400 for a married couple filing jointly if both spouses are age 65 or over). Origin: M.G.L. c. 62, S. 3B(b)(1)(C) and (2)(C) Estimate: $24.9 |
24.9 |
| 1.404 |
Additional Exemption for the Blind
A blind taxpayer is allowed an additional exemption against "earned" income of $2,200 ($4,400 for a married couple filing jointly if both spouses are blind). Origin: M.G.L. c. 62, S. 3B(b)(1)(B) and (2)(B) Estimate: $1.2 |
1.2 |
| 1.405 |
Dependents Exemption Where the Child Earns Income
3
Taxpayers are allowed an additional exemption of $1,000 for a dependent child even when the child earns income against which a personal exemption can be taken. Comment: The estimate cannot be separated from the figure for the dependents exemption in endnote 3. The estimate cannot be separated from the figure for the dependents exemption in endnote 3. Origin: IRC S. 151(c) in effect January 1, 1988 and M.G.L. c. 62 S. 3B(b)(3) Estimate: N.A. |
N.A. |
| 1.406 |
Deduction for Dependents Under 12
Individual taxpayers and married taxpayers filing jointly with one or more dependents under age 12, who do not claim the deduction for child care described in item 1.409 below, may claim this deduction. Filers with one dependent under 12 may deduct $3,600, while filers with two or more dependents under 12 may deduct $7,200. Origin: M.G.L. c. 62, S. 3B(a)(8) Estimate: $138.5 |
138.5 |
| 1.407 |
Personal Exemption for Students Age 19 or Over
A taxpayer may claim a dependent exemption of $1,000 for a child who is a full-time student even if he or she is 19 or over. Origin: IRC S. 151(c) in effect January 1, 1988 and M.G.L. c. 62 S. 3B(b)(3) Estimate: $8.9 |
8.9 |
| 1.408 |
Deduction for Adoption Fees
Adoption fees paid to a registered adoption agency are deductible against "earned" income. Origin: M.G.L. c. 62, S. 3B(b)(5) Estimate: $0.7 |
0.7 |
| 1.409 |
Deduction for Business-Related Child Care Expenses
Taxpayers qualifying for the credit for employment-related childcare expenses in the Internal Revenue Code are allowed a deduction against "earned" income for the amount of the expenses that qualify for the credit. Beginning in tax year 2001, the cap on this deduction was increased, and the coverage expanded to include elderly and disabled dependents. The cap increased from $2,400 to $3,600 for filers with one dependent, and from $2,400 to $4,800 for filers with two or more dependents. Beginning in tax year 2002, the cap was further increased to $4,800 for qualifying filers with one dependent and to $9,600 for filers with two or more dependents. Comment: For federal tax purposes, the requirement that employment-related child care expenses relate only to children under age 15 was further restricted to children under age 13. In addition, a federal change now requires a taxpayer to include employer-provided dependent care expenses when calculating the limitation amount of qualifying expenses. For federal tax purposes, the requirement that employment-related child care expenses relate only to children under age 15 was further restricted to children under age 13. In addition, a federal change now requires a taxpayer to include employer-provided dependent care expenses when calculating the limitation amount of qualifying expenses. Origin: IRC S. 21, in effect January 1, 1988 and M.G.L. c. 62, S. 3B(a)(7) Estimate: $14.8 |
14.8 |
| 1.410 |
Exemption of Medical Expenses
Medical and dental expenses in excess of 7.5% of federal adjusted gross income are deductible against "earned" income for taxpayers who itemize deductions on their federal returns. Origin: IRC S. 213 and M.G.L. c. 62, S. 3B(b)(4) Estimate: $69.1 |
69.1 |
| 1.411 |
Rent Deduction
Renters are able to deduct against Part B income one-half of the rent paid for a principal residence located in Massachusetts up to a maximum deduction of $3,000 per year. This maximum was last raised in tax year 2001. Origin: M.G.L. c. 62, S. 3B(a)(9) Estimate: $114.7 |
114.7 |
| 1.412 |
Nontaxation of Charitable Purpose Income of Trustees, Executors or Administrators
The adjusted gross income of trustees, executors or administrators, which is currently payable to or irrevocably set aside for public charitable purposes is tax-exempt. Origin: M.G.L. c. 62, S. 3A(a)(2) and B(a)(2) Estimate: N.A. |
N.A. |
| 1.413 |
Exemption of Interest on Savings in Massachusetts Banks
Up to $100 ($200 on a joint return) of interest from savings deposits or savings accounts in Massachusetts banks is excluded from "earned" income. Origin: M.G.L. c. 62, S. 3B(a)(6) Estimate: $6.9 |
6.9 |
| 1.414 |
Tuition and Student Loan Interest Deduction
A federal and Massachusetts deduction is allowed for interest paid by the taxpayer, up to an annual maximum of $2,500, for a qualified education loan for graduate or undergraduate education, subject to taxpayer income limitations. Under the January 1, 1998 Internal Revenue Code, this deduction was limited to the first 60 months and subject to lower taxpayer income limitations. As a result of the 2005 Code Update, Massachusetts adopts the new federal provision that repealed the 60 month limitation and allows higher taxpayer income limitations, subject to annual inflation adjustments. For tax year 2007, the maximum deduction of $2,500 is reduced for taxpayers when federal modified adjusted gross income exceeds $50,000 ($105,000 for joint returns) and is completely eliminated when federal modified gross adjusted gross income is $65,000 ($135,000 for joint returns). Origin: M.G.L. c. 62, S. 3B(a)(11),(12) Estimate: $34.8 |
34.8 |
| 1.415 |
Charitable Contributions Tax Deduction
For tax year 2001, a deduction was allowed for charitable contributions in determining Part B taxable income. The deduction amount was equal to the taxpayer's charitable contributions for the year, as defined under the Federal Internal Revenue Code and without regard to whether the taxpayer elected to itemize deductions on his or her federal income tax return. Chapter 186 of the Acts of 2002 suspended this deduction, so no tax expenditure is recorded for the current fiscal year. Origin: M.G.L. c. 62 S.6I Estimate: N.A. |
N.A. |
| 1.416 |
Educators' Deduction
Massachusetts adopts the deduction for expenses paid or incurred by an eligible educator for books, supplies, equipment and other qualified materials used in the classroom. The deduction is limited to $250 per eligible educator. This deduction expired at the end of tax year 2005. Origin: IRC sec. 62(a)(2)(D) Estimate: Expired |
Expired |
| 1.417 |
Home Heating Fuel Deduction
Expenses incurred for home heating oil, natural gas, or propane purchased between November 1, 2005 and March 31, 2006 were deductible. For homeowners and for renters who pay their own separate heating bills, the deduction was limited to the actual amount paid for home heating oil, natural gas or propane, or $800, whichever was less. For renters where the cost of heating is included in rental payments, the deduction was limited to 20% of rental payments, up to a maximum of $800. The deduction was available to single filers whose adjusted gross income was $50,000 or less, and to joint filers and heads of household whose adjusted gross income was $75,000 or less. Qualifying taxpayers could take the deduction in 2005 for purchases made in 2005 during the period November 1 through December 31, 2005. Where a taxpayer did not take the full $800 deduction in 2005, the taxpayer could take the remainder in 2006 for heating expenses in 2006 through March 31, 2006. Origin: Chapter 140 of the Acts of 2005 Estimate: Expired |
Expired |
| 1.418 |
Deduction for Costs Involved in Unlawful Discrimination Suits
Massachusetts adopts the federal deduction for attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination, up to the amount included in gross income for the tax year from such claim. Origin: IRC secs. 62(a)(19) and 62(e) Estimate: N.A. |
N.A. |
| 1.419 |
Business Expenses of National Guard and Reserve Members
Massachusetts adopts the deduction for unreimbursed overnight travel, meals and lodging expenses of National Guard and Reserve Members who must travel more than 100 miles from home to perform services as a National Guard or reserve member. Origin: IRC secs. 62(a)(2)(E) and 162(p) Estimate: Negligible |
Negligible |
| 1.420 |
Archer Medical Savings Accounts
Under the January 1, 1998 Code, Massachusetts allowed a deduction for an Archer Medical Savings Account (MSA) contribution only for individuals who were active MSA participants before January 1, 2001. As a result of recently enacted legislation that aligned the Massachusetts tax code with the Internal Revenue Code as of January 1, 2005, Massachusetts adopts the federal deduction for Archer MSA contributions made on or after January 1, 2005 for all federally qualified individuals. Origin: IRC sec. 220 Estimate: Negligible |
Negligible |
| 1.421 |
Deduction for Clean-Fuel Vehicles and Certain Refueling Property
A federal and Massachusetts deduction is allowed for a portion of the cost of qualifying motor vehicles that use clean-burning fuel. Under the January 1, 1998 Code, this deduction was due to expire for vehicles placed in service after December 31, 2004. As a result of recently enacted legislation that aligned the Massachusetts tax code with the Internal Revenue Code as of January 1, 2005, Massachusetts adopts the new federal provision allowing the deduction for vehicles placed in service on or before December 31, 2006. Origin: IRC secs. 62(a)(14) and 179A Estimate: Negligible |
Negligible |
| 1.422 |
Health Savings Accounts
Massachusetts adopts the federal deduction allowed to individuals for contributions to a Health Savings Account, subject to federal limitations, which are adjusted annually for inflation. For calendar year 2007, the maximum deduction limit is $2,850 for an individual plan and $5,650 for a family plan. The maximum additional deduction for individuals age 55 or older is $800. Origin: IRC secs. 62(a)(19) and 223 Estimate: $4.0 |
4.0 |
| 1.423 |
Commuter Deduction
(Note: item 1.423 was formerly the temporary Tuition and Fees Deduction) For tax years beginning on or after January 1, 2006, individuals may deduct certain commuting costs paid in excess of $150 for:
The total amount deducted may not exceed $750 per individual. Amounts paid must be reduced by any amounts reimbursed or otherwise deductible. Origin: M.G.L. Chapter 62, Sec. 3 (B) (a) (15) Estimate: $5.8 |
5.8 |
| 1.424 |
Self-Employed Health Insurance Deduction
Massachusetts adopts the federal deduction allowed to self-employed individuals for premiums on health insurance. Insurance may be for the individual, spouse, or member of their family. The insurance must be established under the self-employed individual's business. Origin: IRC secs. 162(I) Estimate: $50.9 |
50.9 |
| 1.425 |
Student Interest Loan Deduction
Massachusetts allows as an option the federal "interest on education loans" deduction. The federal deduction phases out based on modified AGI. Alternatively, Massachusetts allows a deduction of undergraduate student loan interest. Filers may only choose one of these deductions. Origin: M.G.L. c. 62, S. 2(d)(1) and I.R.C. secs. 62(a)(17), ss 221. Estimate: $19.5 |
19.5 |
Key:
| ORIGIN | |
| IRC | Federal Internal Revenue Code (26 U.S.C.) |
|---|---|
| U.S.C | United States Code |
| M.G.L. | Massachusetts General Laws |
| Rev. Rul.; C.B. | Revenue Ruling; Cumulative Bulletin of the U.S. Treasury |
| ESTIMATES | All estimates are in $ millions. |
Footnote(s):
1 This item and others citing this endnote cover employee fringe benefits. We accept as standard the following treatment of these benefits: the expense incurred by the employer in providing the benefit is properly deductible as a business expense and the benefit is taxed as compensation to the employee as if the employee had received taxable compensation and then used it to purchase the benefit. Of course, there are problems with this analysis. In some cases, the "benefit" is more a condition of employment than a true benefit. For example, a teacher required to have lunch in the school cafeteria may prefer to eat elsewhere even if the school lunch is free. On the other hand, in many cases the provision of tax-free employee benefits is clearly a substitution for taxable compensation.
2 This item and others citing this endnote cover contributory pension plans. The standard tax treatment of these plans is as follows: Component Standard Treatment Contributions: Made out of income that is currently taxed to the employee. Investment Income: Taxed to the employee as "earned" income. Distributions from Pension Funds: Tax-free to the extent they are made out of dollars previously taxed to the employee as contributions or investment income. The non-standard treatment of contributions, investment income, or distributions as described in items 1.006, 1.101, 1.104, and 1.402, results in either nontaxation or deferrals of tax.
3 FY09 estimates for the basic personal exemptions and the no-tax status discussed in the introduction to the personal income tax are (in millions of dollars): Personal exemption for single taxpayers: $287 Personal exemption for married couples: $531 Personal exemption for married taxpayers filing separately: $13 Dependents exemption: $94 Personal exemption for heads of households: $95 No tax status/Limited income credits: $31 It should be noted that Chapter 186 of the Acts of 2002 reduced personal exemptions for tax year by 25% from their 2001 levels effective in tax year 2002; one-quarter of this reduction was restored effective tax year 2005, with additional one-quarter amounts restored in tax years 2006, 2007, and 2008. These changes in personal exemptions are reflected in the estimates above.
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