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Hey NaggingFool,

You made a point in a thread on the budgetting forum that MA taxes out of state interest (ING, Emigrant, etc) at 12%.

Now, even with this I am *much* better off at one of those than at my local bank, but I was concerned, so I did some research and it appears that that law is no longer true. I responded as such on the tread to get your opinion but there was never a response. I noticed you were here, as are many knowledgeable people, so I thought I'd repost and see if we could get to the bottom of this.


I found this:

Money Market Deposit Accounts in financial institutions other than Massachusetts banks, credit unions etc.,(e.g. Fidelity)

Does not qualify as MA bank interest; amount is reported on Schedule B and taxed at 5.3%


source:
http://www.dor.state.ma.us/help/guides/abate_amend/Personal/issues/InterestTableRate.htm


And this:

1999 Law Change:
Effective January 1, 1999, the Massachusetts tax rate on Schedule B interest and dividend income was the same as the tax rate on Form 1, Line 10 or 1-NR/PY, Line 12 income

Prior to 1999:
The tax rate for dividends and interest, other than from Massachusetts banks, was 12%. TIR 98-8 required that Schedule B deductions and exemptions be allocated on a prorated basis once the reduced rate for interest and dividends took effect. This method of prorating is inconsistent with the new capital gains legislation, and has been repealed by TIR 99-17.


source:
http://www.dor.state.ma.us/help/guides/abate_amend/Personal/issues/RatesTax.htm


Now I will note that there's a $100 exception for in-state interest which does not exist for out of state, but at these apparent rates that's only $5.30, which is muc less than the difference I gain by moving it to Emigrant.

So, is out of state interest now only taxed at 5.3% also, or am I confused?

Thanks,

Fred
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