EducationSolutionsFederal vs. state filing . . .

Many states use the Internal Revenue Code as their starting point in defining income and make modifications from there. As they say, the devil’s in the details. And that’s the case with state returns. Some modifications are straight-forward. For example, most states don’t allow a deduction for state income taxes when calculating taxable income. Tax prep software should handle that automatically. But there are other differences. Some states don’t allow certain deductions and provide benefits not available on you federal return. For example, some states exclude retirement income, provide special benefits for veterans or those currently serving in the military, and New York provides a credit for volunteer fire fighters. Massachusetts exempts up to $200 of interest income from a Massachusetts bank. If you’re doing your own return, check the schedules or worksheets that allow modifications to your income, deductions or credits. Because the tax rates are lower, any savings are likely to be less than on your federal return, but they’ll still be worth your effort.