Nonresident and Part-Year Resident Deductions

Deductions are either:

  • deducted in full if directly related to specific items of taxable income reported on Form 1-NR/PY or to a personal residence located in Massachusetts;
  • prorated for nonresidents based on income reported - the deduction must be multiplied by Massachusetts Form 1-NR/PY, Line 14g, Nonresident Deduction and Exemption Ratio. This ratio is a fraction; the numerator of which is Massachusetts gross income and the denominator of which is the amount which would have been Massachusetts gross income had the taxpayer been a resident of the Commonwealth throughout the full taxable year.
  • prorated for part-year residents based on days a Massachusetts resident - the deduction is prorated by multiplying the amount by Massachusetts Form 1-NR/PY, Line 2, Number of Days as a Massachusetts resident.

The following deductions are allowed in full if directly related to specific items of taxable income reported on Form 1-NR/PY or to a personal residence located in Massachusetts:

  • FICA, Medicare, RR, U.S. or Massachusetts Retirement Deduction;
  • Certain Schedule Y deductions:
    • employee business expenses;
    • miscellaneous deductions from U.S. 1040, Line 36, except 501(c)(18) (for example; jury duty);
    • moving expenses;
    • penalty on early savings withdrawal;
    • self-employed health insurance
For example, early withdrawal of savings deduction is only available if the penalties were related to Massachusetts interest income reportable, or previously reported, on a Massachusetts tax return.
  • Certain Schedule Y deductions because the amount was required to be included initially:
    • incapacitated firefighter and police officer income excluded under G.L. c.41, s.111F;
    • income excluded income per U.S. tax treaties.
  • Rental Deduction:
    Part-year residents and nonresidents are allowed a deduction equal to 50% of the rent paid (up to $3,000) if the residence is located in Massachusetts and it is the taxpayer's principal residence.

    Nonresidents entitled to this deduction would be individuals who have no domicile, for example migrant workers, who come to Massachusetts and pay rent while they are working here.

The following deductions may be allowable to either a nonresident or part-year resident. If allowable, the deduction must be prorated by Line 2 for part-year residents or 14g by nonresidents:

  • *child under age 13/disabled dependent/spouse care expenses;
  • number of dependent member of household under age 12, dependents age 65 or over, or disabled dependents; and
  • Schedule Y deductions:
    • *alimony paid;
    • clean fuel vehicles deductions;
    • college tuition deduction;
    • *educator's deduction;
    • *health savings accounts deduction
    • *home heating fuel deduction;
    • medical savings account;
    • student loan interest;
    • *tuition fees deduction; and
    • undergraduate student loan interest.

* only part-year residents may claim these deductions during the time in which they were Massachusetts residents.

Nonresident and Part-Year Resident Exemptions

Nonresident Exemptions Are Prorated Based on Massachusetts Income Reported to Total Income:
Nonresidents must multiply the total exemption amount reported on Massachusetts Form 1-NR/PY, Line 22a by Line 14g, Nonresident Deduction and Exemption Ratio. This ratio is a fraction; the numerator of which is Massachusetts gross income and the denominator of which is the amount which would have been Massachusetts gross income had the taxpayer been a resident of the Commonwealth throughout the full taxable year.

Part-Year Resident Exemptions Are Prorated Based on Days as a Massachusetts Resident:
Part-year residents must multiply the total exemption amount reported on Massachusetts Form 1-NR/PY, Line 22a by Line 2, Total Days As Massachusetts Resident.

Any person with a short taxable year (not relative to death) is only allowed the exemptions related to the number of days as a resident of Massachusetts divided by 365.

Form 1-NR/PY, Line 3 Total Income

Line 3 Total income from U.S. 1040 includes items that are included federally but excluded in Mass:

  • IRA/Keogh/Pension and Profit Sharing distributions that represent contributions previously taxed by Massachusetts;
  • interest income from certain U.S. and Massachusetts obligations;
  • pension income from Massachusetts and U.S. Government contributory;
  • pension income from the U.S. military noncontributory;
  • social security and Tier I Railroad Retirement benefits; and
  • state tax refunds.

Line 3 Total income, from U.S. 1040 does not include items that are excluded federally but included in Mass:

  • interest income from other states obligations;
  • contributions to a pension plan by Massachusetts state or local employees;
  • foreign-earned income up to $70,000; and
  • net operating loss carry forward.

Note: Any difference between Massachusetts treatment and federal treatment of an item of income would be reflected in the difference between item 3, Total Income form U.S. 1040 and item 14f, Total Income. If the difference is greater than 10%, a statement should be attached. Examples are social security benefits and interest on non Massachusetts bonds which are included.

Example To Show That Line 14f, Total Income amount Will Not Necessarily Equal Line 3, Total Income:

U.S.1040 Income:Amount:
Social Security Benefits$4,500
Schedule C Income from MA business$2,800
MA government pension$12,000
Vermont bank interest$800
U.S. bond interest$1,600
Total U.S. 1040, Line 22 Income$21,700
MA Form 1-NR/PY Income:Amount:
Line 3. Total Income from U.S. 1040$21,700
Line 14d. Total income this return$2,800
Line 14e. Non-MA source income$800
Line 14f. Total income$3,600

Income Excluded on MA Form 1: The social security benefits, the U.S. bond interest and the Massachusetts government pension are not considered Massachusetts gross income and therefore are not added back to arrive at the total income amount in Line 14f.

Form 1-NR PY, Line 14g, Nonresident Deduction and Exemption Ratio

Nonresidents are required to prorate certain deductions and exemptions by a ratio of Massachusetts source income (14d) divided by total income from all sources (14f) computed as if the taxpayer were a resident of the commonwealth for the entire taxable year.

Line 14a, total 5.30% income from line 12 of Massachusetts Form 1-NR/PY. This amount may not be a negative number. Losses are entered as zero.

14b, interest income included on line 7a or 7b of Massachusetts Form 1-NR/PY, whichever is smaller.

14c, Total Schedule B and Schedule D income included on Schedule B, Part 1, Line 7 and Part 2, Line 13, and Schedule D, Part 1, Line 12, columns A, B, C, D, E and F and Part 2, Line 11. Not less than 0.

14d, Total income this return, which is the total of Massachusetts source income, 14a thru 14c.

14e, Non-Massachusetts source income which is any income that would be taxable to someone who was a full year resident of Massachusetts. This amount cannot be a negative number. Losses are entered as zero.

Income that Does Get Added back:

  • interest income from other states obligations;
  • contributions to a pension plan by Massachusetts state or local employees;
  • foreign-earned income up to $70,000; and
  • net operating loss carry forward.

Income That Does Not Get Added back:

  • IRA/Keogh/Pension and Profit Sharing distributions that represent contributions previously taxed by Massachusetts;
  • interest income from certain U.S. and Massachusetts obligations;
  • pension income from Massachusetts and U.S. Government contributory;
  • pension income from the U.S. military noncontributory;
  • social security and Tier I Railroad Retirement benefits; and
  • state tax refunds.

 

  • *military service compensation.

    * Massachusetts Adopts the Non-Massachusetts Military Service Compensation Exclusion for Tax Years Beginning on or after January 1, 2003:
    The Federal Service members Civil Relief Act (P.L. 108-189, effective December 19, 2003) provides that a tax jurisdiction may not use military service compensation of a nonresident service member to increase the tax liability imposed on other income earned by the nonresident service member or spouse subject to tax by the jurisdiction.

    Nonresident taxpayers, who have a filing requirement in Massachusetts because they have MA source income other than military source income:
    • should not include any military service compensation as non-Massachusetts source income when determining whether they qualify for NTS or LIC;
    • should include military service compensation as non-Massachusetts source income when determining the deduction and exemption ratio. Specifically, nonresident taxpayers filing Form 1-NR/PY must include any military service compensation received during the taxable year Line 14e of Form 1-NR/PY.
Military service compensation means both compensation earned by members of the armed forces for service in a combat zone (which is always excluded from gross income to the extent excluded federally) as well as any other military service compensation.


14f, Total income, add 14d and 14e. This is Massachusetts gross income plus non-Massachusetts source income, i.e. Massachusetts gross income as if the taxpayer were a full year Massachusetts resident

Note: Line 14f, Total Income amount will not necessarily equal Line 3, Total Income.

14g, Deduction and exemption ratio which is Massachusetts income divided by total income.

Note: Any difference between Massachusetts treatment and federal treatment of an item of income should be reflected in the difference between item 3, Total Income form U.S. 1040 and item 14f, Total Income. If the difference is greater than 10%, a statement should be attached. Examples are social security benefits and interest on non Massachusetts bonds which are included.

Schedule R/NR Resident/Nonresident Worksheet

Taxpayers who are Massachusetts residents for part of the year and nonresidents with Massachusetts source income for another part of the year must fill out Schedule R/NR which prorates income, deduction and exemption amounts based on both number of days a Massachusetts resident and on income reported to Massachusetts. The amounts computed on Schedule R/NR will be the total amounts to be entered on Form 1-NR/PY.

Line 14a, total 5.30% income from Schedule R/NR column D lines 5 through 11.

14b, interest income included on line 7a or 7b of Massachusetts Form 1-NR/PY, whichever is smaller if earned as a nonresident.

14c, Total Schedule B and Schedule D income from Schedule R/NR, column D, lines 24 and 27.

14d, Total income this return, which is the total nonresident portion of Massachusetts source income from this return, 14a through 14c.

14e, Non-Massachusetts source income which is the difference between columns C and D of Schedule R/NR, (total nonresident income less nonresident Massachusetts source income). This includes only the income that would be taxable to someone who was a full year resident of Massachusetts. This amount cannot be a negative number. Losses are entered as zero.

14f, Total income, add 14d and 14e.

14g, Deduction and exemption ratio the numerator of which is Massachusetts gross (source) income of a nonresident and the denominator of which is Massachusetts gross income as if taxpayer were a full year Massachusetts resident, is used to determine the allowed amount of certain deductions, exemptions and credit.

Massachusetts References:

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