Legal Question in Tax Law in Massachusetts

The entire amount is subject to both state and federal income tax but not subject to social security taxes.

To the extent you have other income or are able to make contributions to an IRA that amount can be deducted from your income as an expense/deduction. If you invest in a property that has less than 5 owners you may be able to shield some of the income from tax by using excess depreciation against it.

You should meet with a CPA and go over your best tax strategies given your situation.

You are taxed on the gross income received, not on what's left in your account after your investments and expenses. If you make qualified charitable contributions, that may be a deduction (subtraction) from what ends up being taxed at the end of the year, but that also depends on the totality of your financial circumstances. For individuals who do not itemize their deductions, donations won't make any difference on your federal return. As far as investments, when the investment is exited (sold), there is a calculation of whether you had a gain or a loss on the particular investments. Gains will be taxed, although generally at a lesser rate than income if you've had it for over a year. Losses may be used to offset other gains, or some portion of non-investment income.