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TCJA MA vs. Federal Tax Differences

The Tax Cuts and Jobs Act, often referred to as Tax Reform, created significant changes to the tax code at the Federal level. Massachusetts (along with most states) has not conformed to all of the new federal rules for individuals. For individuals, Massachusetts conforms to the 2005 Federal Tax Code and then must adopt each new law as a separate exception. Business tax returns conform as each new law is activated for federal taxes; however, there may be some specific exemptions that come out as the DOR reviews how the new laws apply to its residents.

One of the most significant tax reform changes for 2018 for individuals, that Massachusetts has not adopted, is the new 20% Qualified Business Income deduction for pass thru entities (S-Corp, partnerships and self-employed individuals). The amount of deduction applied to the federal return will not be allowed for MA income taxes.

Other individual Federal provisions NOT adopted by Massachusetts include:

  • Bonus depreciation expansion (Massachusetts specifically disallows bonus depreciation)
  • Elimination of personal exemptions (still allowed for Massachusetts)
  • Elimination of moving expenses (still allowed for Massachusetts)
  • Elimination of alimony income/deductions (still allowed for Massachusetts)
  • Excess business loss deductions (now capped for Federal purposes)

The more significant changes that have been adopted by Massachusetts include:

  • Meals & Entertainment (Click here for Newburg’s Article on Tax Reform and M&E)
  • Interest expense limitation that reduces the interest deductible by certain businesses with revenues exceeding $25Million
  • Employee business expense deductions that are subject to the 2% AGI threshold
  • Section 179 depreciation expansion

Please contact us if you would like additional information regarding the new tax reform or other matter impacting your tax situation.

www.newburg.com

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