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On the Massachusetts income tax Form 1, line 5 is for "Interest from Massachusetts Banks". This interest income gets an amount deducted from it ($200 for married filing jointly), and is reported there on the main tax form. Whereas interest from any other sources gets reported separately over on Form 1 Schedule B.

So certainly if I have a savings account with my brick & mortar bank down the street, and get interest from it, the interest from it would be this "Interest from Massachusetts Banks" and get this deduction. But what about if I use a brokerage account (like Fidelity), and purchase a brokered CD that is from a Massachusetts bank? There's a sense in which it's Fidelity paying me the interest (in that they're the ones who would be sending me the 1099-INT), and Fidelity isn't a Massachusetts Bank, but there's also a sense in which they are just passing along what is truly just interest that is being paid me via a Massachusetts Bank.

So for this interest from a brokered CD that's ultimately from a Massachusetts Bank, do I report it on Form 1 Line 5a or does it only show up on Form 1 Schedule B?

The Form 1 instructions don't really clarify beyond saying that Line 5 is for interest from deposit accounts (like CDs) "in Massachusetts banks", and doesn't clarify whether getting them indirectly through a brokerage counts.

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Well, I decided that I might just try calling up the state and seeing what they said. The person I talked to at the Massachusetts Department of Revenue was quite helpful and said that as long as the amount from the brokerage came on a normal 1099-INT, and it was due to being from a Massachusetts bank, that that portion of the income does indeed count as "Massachusetts bank interest" and goes on the main Form 1. This is true even if the 1099-INT covers both interest from the banks as well as other investment interest, that one would put the portion due to Massachusetts banks on the main Form 1 and the rest of it on the Schedule B.

  • I am in MA as well, this is good to know. – JoeTaxpayer Jul 12 at 16:58
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From page 10 of the Form 1 instructions:


Line 5. Interest from Massachusetts Banks

Enter in line 5a the total amount of interest received or credited to deposit accounts (term and time deposits, including certificates of deposit, savings accounts, savings shares, and NOW accounts) in Massachusetts banks. Then, enter your exemption amount in line 5b (if married filing
jointly, enter $200; otherwise, enter $100). Subtract line 5b from 5a and enter the result in line 5, but not less than 0.


I'd also check with this resource from MA Tax Aide. Appendix B starts:

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Since a "Massachusetts bank" requires that the bank in question has a physical presence in the Commonwealth. So long as the CD is with a bank with a brick-and-mortar shop in MA, that should suffice. My guess is that most brokerages themselves do not have a physical presence in MA, but the bank that holds the CD may.

  • I'm not quite sure if your last paragraph is saying that a non-Massachusetts brokerage holding a CD issued by a Massachusetts bank counts, or not. And I'm also not sure how you're getting that conclusion based on the document you've shown. But I appreciate the information! – user42405 Jun 12 at 15:39

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