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Taxes Paid to Other Jurisdictions Credit

General Rules

Massachusetts residents and part-year residents are allowed a credit for taxes due any other jurisdiction. The credit is available only on income reported and taxed on a Massachusetts return.

Note: Tax due is different from taxes withheld. The correct amount to use for this credit is the calculation of tax due, not tax withheld.

The Credit is allowed for taxes paid to:

  • other states in the U.S.;
  • any territory or dependency of the U.S., (including Puerto Rico, the Virgin Islands, Guam, the District of Columbia; and/or
  • the Dominion of Canada or any of its provinces. The amount must first be reduced by an amount allowed as a federal Foreign Tax Credit on U.S. Form 1116. The allowable federal credit must be deducted whether or not claimed;
  • New Hampshire for business profits tax which is considered an income tax
  • District of Columbia Unincorporated Business Franchise Tax (UBT)

The credit is for tax due to another jurisdiction; it is not for:

  • taxes paid to the U.S. government;
  • any city or local tax;
  • taxes paid to a foreign country other than Canada;
  • interest and penalties paid to another jurisdiction; and
  • excise, property tax or franchise tax.

Qualification for Taxes Paid to Other Jurisdictions Credit is determined by completing the following worksheets:

  • for residents, the Schedule Z, Line 9 Worksheet - Income Tax Paid to Another Jurisdiction;
  • part-year resident, the credit on Schedule F, Credit for Income Taxes Paid to Other Jurisdictions.

Nonresidents may not claim the taxes paid to other jurisdiction credit on their Massachusetts Form 1-NR/PY.

The computation is based on comparing the Massachusetts income tax on income reported to the other jurisdiction to the actual tax paid to the other jurisdiction; the credit is limited to the smaller of these two numbers.

S Corporations may claim a credit for taxes paid to other states on income only, not on property, net worth or excise tax.

S Corporation shareholders or partners must obtain a statement from the S Corporation or partnership if the credit is claimed as part of distributive income taxed in another jurisdiction. The statement must list the taxes paid on behalf of the shareholder or partner and specify where the taxes were paid.

Income Taxed at a Different Rate:
In calculating the allowable credit, a separate calculation should be prepared for each item of income taxed at a different rate. For example, Part B income requires a separate calculation from Part C income items.

Where to Report on Original Tax Return; What to Enclose:

Documentation to Submit with Abatement/Amended Tax Return:

  • Copy of the personal income tax return from the other state or jurisdiction;
  • Copy of Massachusetts Form 1 or 1-NR/PY, Schedule Z - Line 12 Worksheet, from the instruction booklet, showing the correct calculation of the credit;
  • For income taxed at different rates, a separate worksheet for each rate of income;
  • For S Corporation shareholder or a partner, a statement from the S corporation or partnership showing the distributive income taxed in another jurisdiction. The statement must list the taxes paid on behalf of the shareholder or partner and specify where the taxes were paid.
Massachusetts References: