Massachusetts Treatment of Self-Employed Individuals 401(k) Contributions

Target Audience: Business Owners, Financial Managers, 401k Plans Interest, Department of Revenue Updates Interest, Self-employed Individuals

The Massachusetts Department of Revenue has issued Directive 08-3, which denies any state tax deduction for partners and other self-employed individuals, for contributions to 401(k) plans beginning in 2008. As opposed to federal tax treatment, 401(k) contributions (including matching contributions) will not be deductible when made. Partners and other self-employed individuals who included their elective contributions in income, may apply for abatements for open tax years prior to 2008.

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