21 July 2026 Massachusetts Department of Revenue publishes information about conformity with the OBBBA's compensation and benefits provisions The Massachusetts Department of Revenue released TIR 26-4 to explain whether and how provisions of the federal One Big Beautiful Bill Act (OBBBA) apply for Massachusetts income tax purposes. Massachusetts generally defines taxable income as contained in the federal Internal Revenue Code (IRC) in effect on January 1, 2024. However, for trade or business expense deductions, the state generally follows the IRC as currently in effect, subject to limited exceptions, and also conforms to certain other specified IRC provisions. The chart below summarizes the compensation and benefits provisions of the OBBBA and whether the current Massachusetts tax code conforms to those provisions. (See Tax Alert 2025-1476 for more information on the compensation and benefits provisions of the OBBBA.) Massachusetts conformity with the OBBBA — compensation and benefits Internal Revenue Code Section | Description | Effective date | Does Massachusetts conform with federal law? * | 132(f)(8) | Bicycle commuting benefits. Makes permanent the exclusion from gross income for bicycle commuting benefits. | January 1, 2026 | No. Massachusetts continues to allow an exclusion for qualified bicycle commuting benefits. | 132(f) | Transportation fringe benefits. Allows a $340 per month exclusion for parking benefits and a $340 per month exclusion for both commuter highway vehicle benefits and transit passes. The monthly limit is indexed each year for inflation. | January 1, 2026 | No. Massachusetts conforms to the monthly maximum for the transit and parking exclusions as they apply under the IRC in effect on or after January 1, 2022. Accordingly, for tax years beginning in 2026, the Massachusetts monthly exclusion amounts are capped at $335 for employer-provided parking and $335 for both transit pass and commuter highway vehicle benefits combined. (See TIR 25-9.) | 217(k), 132(g)(2) | Moving expenses. Makes permanent the elimination of the deduction for moving expenses except for members of the Armed Forces and certain members of the intelligence community. | January 1, 2026 | No. See also TIR 23-5 and Tax Alert 2023-0236. | 224 | No tax on tips. Creates deduction from gross taxable income for qualified tips up to $25,000. | January 1, 2025 (sunset 2028) | No | 225 | No tax on overtime. Creates deduction from gross taxable income for qualified overtime pay. | January 1, 2025 (sunset 2028) | No | 128, 139J | Employer contribution to Trump Accounts. Excludes from gross income amounts paid by employers as a contribution to the Trump account of the employee or dependents up to $2,500 per year. | January 1, 2026 | No | 274(o) | Limitations on deductions for business meals. Disallows an employer deduction for food or beverages provided to employees through an eating facility and meals provided to employees for the convenience of the employer. | January 1, 2026 | Yes | 129(a)(2)(A) | Dependent care assistance. Increases the maximum exclusion from taxable wages for dependent care assistance from $5,000 to $7,500. | January 1, 2026 | No | 127(c)(1)(B) | Educational assistance. Makes permanent that employer payment of a student loan is included in qualified educational assistance and subjects the maximum exclusion of $5,250 to annual inflation adjustments. | January 1, 2026, for student loans; January 1, 2027, for inflation adjustments to maximum exclusion | No. See also TIR 23-5 and Tax Alert 2023-0236. |
*This TIR considers provisions of the 2026 supplemental budget bill (HB 5470). For information on other OBBBA conformity provisions contained in HB 5470, see Tax Alert 2026-1331. Employers should note the differences between the federal and Massachusetts tax codes and monitor developments closely in the future. Employers should also be aware that other states may conform differently to the OBBBA, making this an essential state research activity in 2026 and future years. | * * * * * * * * * * | | Contact Information | For additional information concerning this Alert, please contact: Workforce Tax Services - Employment Tax Advisory Services | | Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor |
Document ID: 2026-1567 |
