| For MA income taxes you have to report bank interest separately depending on whether the interest is from a "Massachusetts bank" or not -- iinterest from MA banks is taxed at 5.3%, whereas interest from non-MA banks is taxed at 12%. It's a nutty system - leave it to the politicians in MA to come up with a system like that, and there is virtually no information on the MA web sites that tell you how to handle interest from internet banks. The advice I've heard in the past is that if the institution has a physical presence in the state, such as a branch - even if you don't use that branch - then you can consider it as MA source, and put the interest on line 5 of form 1 to get the lower tax rate. Otherwise you report it on Schedule B, which carries over to line 23 of form 1, and is taxed at the higher rate. I suggest you call or search your bank's web site to see if they have a MA branch. | 
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