Overview

Massachusetts and Federal Gross Income Exclude:
 

  • Compensation, Injury and Sickness Benefits
  • Employee (Fringe) Benefits
  • Other Items Specifically Excluded
  • Tax Relief for Victims of Terrorist Attacks


Massachusetts Gross Income Excludes the Same Items of Income That Are Excluded to Residents:
(Certain Income that is Included in Federal Gross Income)

  • 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 employee Massachusetts and U.S. Government contributory plans;
  • pension income from U.S. Military Non-contributory Pension plans;
  • social security and Tier I Railroad Retirement benefits; and
  • state tax refunds.

Massachusetts Gross Income Excludes Certain Items of Income Derived from Sources within Massachusetts:

  • non-business related interest, dividends and gains from the sale or exchange of certain intangibles; and
  • qualified pension income.

Massachusetts gross income includes items of income derived from sources within Massachusetts. Specifically, this includes income:

  • derived from or effectively connected with any trade of business, including any employment carried on by the taxpayer in Massachusetts, whether or not the nonresident is actively engaged in a trade or business or employment in Massachusetts in the year in which the income is received;
  • from any lottery or wagering transaction in Massachusetts;
  • from ownership of  any interest in real or tangible personal property located in Massachusetts;
  • from  patents, copyrights and other similar intangibles connected to Massachusetts; and
  • of all other types falling within the definition of Massachusetts source income.


Massachusetts Gross Income =

  •  Form 1-NR/PY, line 12 income from Massachusetts sources; plus
  •  *Schedule B, Line 35 interest and short-term capital gains related to Massachusetts trade or business; plus
  •  Schedule D, Line 19 long-term capital gains related to Massachusetts trade or business
Filing Requirement: Nonresidents are required to file income tax returns with Massachusetts if their Massachusetts gross income (derived from sources within Massachusetts) exceeds either $8,000 or the prorated personal exemption to which they are entitled, whichever is less.

Massachusetts Adjusted Gross Income (AGI) as if the Taxpayer were a Full Year Massachusetts Resident – Computation/Pro-forma Form 1 to include Massachusetts gross income from all sources:

     Massachusetts AGI would be:

+   Form 1, line 10
+   Schedule B, Line 35 
+   Schedule D, Line 19
-    Schedule Y, Lines 1 – 10
-    Schedule B adjustments 
-    Schedule D adjustments
Massachusetts AGI that would be included if the Taxpayer were a Full Year Massachusetts Resident

 

No Tax Status (NTS) – Taxpayer fills out Schedule NTS-L-NR/PY. NTS is based on Massachusetts adjusted gross income that would be included if the taxpayer were a full year Massachusetts resident.  Taxpayers who have a requirement to file may still qualify for this status depending on their Massachusetts adjusted gross income.

Limited Income Credit (LIC) – Taxpayer fills Schedule NTS-L-NR/PY. LIC is based on Massachusetts adjusted gross income that would be included if the taxpayer were a full year Massachusetts resident.  Taxpayers who have a requirement to file but do not qualify for NTS may qualify for this credit depending on their Massachusetts adjusted gross income.

Schedule NTS-L-NR/PY – Non- Massachusetts Source AGI:

+   Schedule NTS-L-NR/PY, Line 7, Massachusetts income that would be included if the taxpayer were a full year Massachusetts resident; less 
-    Schedule NTS-L-NR/PY, Line 9, Schedule Y deductions, lines 1 – 10 that would be allowed if the taxpayer were a full year Massachusetts resident.


Massachusetts Taxable Income = Massachusetts Adjusted Gross Income Less:
  • Form 1-NR/PY, Lines 15 –18
  • Schedule Y, Lines 11 – 14
  • Exemptions

Tax computation


Form 1-NR/PY, Line 3, Total income, from U.S. 1040; line 22; 1040A, line 15; 1040EZ, line 4; 1040NR, line 23; or 1040NR-EZ, line 7 = federal gross income reported to the IRS.  This amount is for informational purposes only and: 

  • includes items of income that are excluded from Massachusetts gross income; and
  • excludes items of income that are included in Massachusetts gross income.

Form 1-NR/PY, Line 3 can be a negative number.

Line 3 Total income, from U.S. 1040 excludes items of income that are included in Massachusetts gross income:

  • interest income from state obligations, other than Massachusetts;
  • contributions to a pension plan by Massachusetts state or local employees;
  • earned income from foreign sources excluded under I.R.C. § 911; and
  • net operating loss carry forward.

Line 3 Total income, from U.S. 1040 includes items of income that are excluded from Massachusetts gross income:

  • interest income from certain U.S. obligations;
  • pension income from Massachusetts and U.S. Government contributory;
  • pension income from the U.S. military noncontributory;
  • previously taxed income from annuity, stock bonus, pension, profit sharing plans and IRAs;
  • social security and Tier I Railroad Retirement benefits; and
  • state tax refunds.


Form 1-NR/PY, Line 14f, Total Income

14d, Total income this return, which is is nonresident Massachusetts gross income (derived from sources within Massachusetts ), 14a thru 14c.

14e, Non-Massachusetts source income, which is any additional income that would be included if a taxpayer were a full year Massachusetts resident.

Income items that are included in line 3 but would be excluded in line 14f:

  • 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;
  • previously taxed income from annuity, stock bonus, pension, profit sharing plans and IRAs;
  • social security and Tier I Railroad Retirement benefits; and
  • state tax refunds.

Income items that are excluded in line 3 but would be included in line 14f:

  • interest income from states obligations other than Massachusetts;
  • contributions to a pension plan by Massachusetts state or local employees;
  • earned income from foreign sources excluded under I.R.C. § 911; and
  • net operating loss carry forward.

14f, Total income, add 14d and 14e which is Massachusetts gross income from all sources, e.g. nonresident Massachusetts gross income plus  income that would be included if taxpayer were a full year Massachusetts resident.

Note: Line amounts cannot be negative numbers. Losses are entered as zero.

Example to show that line 14f, Total Income will not necessarily equal Line 3, Total Income:

U.S. 1040 Income:Amount:
Social Security Benefits$9,500
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$26,700
MA Form 1-NR/PY Income:Amount:
Line 3 Total Income from U.S. 1040$26,700
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.