Massachusetts tax law distinguishes between residents and nonresidents. Residents are generally taxed on all of their income, unless otherwise excludible; nonresidents are only taxed on their income derived from sources within Massachusetts. Nonresidents are taxed on their Massachusetts gross income (derived from sources within Massachusetts) if such amount exceeds either $8,000 or the prorated personal exemption to which they may be entitled, whichever is less.
- Massachusetts Nonresident Regulation
- Technical Information Release (TIR) 03-13: Taxation of Income Earned by Nonresidents
- Technical Information Release (TIR) 95-7: Change in the Definition of "Resident" for Massachusetts Income Tax Purposes
- Directive (DD) 03-12: Taxation of Income Earned by Non-Residents after St. 2003, C. 4, Section 7
1. What is Massachusetts source income for nonresidents?
Massachusetts gross income includes items of income derived from sources within Massachusetts. 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.
2. Am I engaged in a trade, business or employment in Massachusetts as a nonresident?
A nonresident generally is not engaged in a trade or business, including any employment carried on in Massachusetts if the nonresident's presence for business in Massachusetts is casual, isolated and inconsequential. A nonresident's presence for business in Massachusetts will ordinarily be considered casual, isolated and inconsequential if it meets the requirements of the Ancillary Activity Test (AAT.)
3. As a part-year resident or nonresident, can I qualify for No Tax Status or the Limited Income Credit?
For nonresidents and part-year residents, Massachusetts General Laws require that Massachusetts Adjusted Gross Income must be computed as if you had been a Massachusetts resident for the entire taxable year. In determining whether or not you qualify for No Tax Status or the Limited Income Credit, you must consider all of your income, including that which is not taxable in Massachusetts.
Nonresident taxpayers that receive military compensation and file Massachusetts Form 1-NR/PY should not include such military compensation when determining whether they qualify for "no tax status" or the "limited income credit." See
TIR 04-6: Effect of the Federal Servicemembers Civil Relief Act (P.L. 108-189) on Massachusetts Nonresidents with Military Compensation.
4. Who can file a composite return?
A pass-through entity may file a composite return on behalf of qualified electing nonresidents reporting and paying income tax on the nonresidents' pro rata or distributions share of Massachusetts source income of the pass-through entity. Massachusetts allows a partnership, an S corporation, or a trust or estate to file an electronic composite return on Form MA NRCR and make estimated tax payments as an agent on behalf of two or more qualified electing nonresident members. (Professional athletic teams who may file a return on behalf of two or more qualified electing nonresident team members must file a composite return on the Form 1-NR/PY, not the Form MA NRCR.)
5. Am I subject to tax in Massachusetts on income that is covered by a tax treaty?
If the United States has a tax treaty with another country, Massachusetts will recognize the treaty and will exclude income to the extent it is excluded federally. Most treaty provisions are reciprocal; if an item of income is not taxable to a U.S. resident who is working in a country overseas, it will not be taxable to a nonresident alien from that country who is working in the U.S.
However, the income received must be included in your Massachusetts gross income and reported as "wages", and if the amount is deductible from Massachusetts gross income, it is claimed as a Schedule Y deduction. you may still need to file a return if your income exceeds the threshold requirement for filing a tax return, which is currently $8,000 or for nonresidents, the smaller of $8,000 or the prorated exemption.
6. How do I retrieve Massachusetts state income tax withheld in error by my employer?
If your employer withheld Massachusetts income tax in error, you need to file a Massachusetts Nonresident/Part-Year resident return, Form 1 NR/PY, to request a refund. You must submit a letter from your employer along with the return, which verifies that you did not work in Massachusetts.
Return to Frequently Asked Questions
7. Does the type of visa I hold determine my residency status in Massachusetts?
Your Massachusetts tax treatment is based on your residency status and not the type of visa you hold. Please see
TIR 95-7, Change in Definition of "Resident" for Massachusetts Income Tax Purposes.
A more in-depth explanation is available in the Residency Status (Vistas) section of a Guide to Taxes.
8. I work both inside and outside of Massachusetts. However, my W-2 statement shows the entire income that I earned throughout the year as Massachusetts wages. How do I determine and report my Massachusetts wages?
Since a W-2 form is a formal statement from your employer reflecting your earnings, any adjustment should be supported by the issuance of a corrected Wage and Tax Statement W-2C or a letter from your employer. You may also be able to determine the income earned in Massachusetts by using the Apportionment methods listed in the Form 1 NR/PY booklet along with a letter from your employer.
Return to Frequently Asked Questions
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 the Massachusetts Form 1-NR/PY, Line 14, Nonresident Deduction and Exemption Ratio. This ratio is a fraction; the numerator of which is Massachusetts gross income (derived from sources within Massachusetts) and the denominator of which is Massachusetts gross income derived from all sources, as if the taxpayer were a full year Massachusetts resident;
- prorated for part-year residents based on days a Massachusetts resident - the deduction must be multiplied by the Massachusetts Form 1-NR/PY, Line 2, Number of Days as a Massachusetts Resident Ratio. This ratio is a fraction; the numerator of which is the number of days taxpayer is a Massachusetts resident and the denominator of which is 365 days.
- prorated for nonresidents based on income reported - the exemptions must be multiplied by the 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 (derived from sources within Massachusetts) and the denominator of which is Massachusetts gross income derived from all sources, as if the taxpayer were a full year Massachusetts resident;
- prorated for part-year residents based on days a Massachusetts resident - the exemptions must be multiplied by the Massachusetts Form 1-NR/PY, Line 22a by Line 2, Total Days as Massachusetts Resident Ratio. This ratio is a fraction; the numerator of which is the number of days taxpayer is a Massachusetts resident and the denominator of which is 365 days.
10. How do I compute credit for taxes paid to another jurisdiction on income I earned while a part-year resident of Massachusetts?
Massachusetts residents and part-year residents are allowed a credit for taxes due to any other jurisdiction. The credit is available only on income reported and taxed on a Massachusetts return. Nonresidents may not claim the taxes paid to other jurisdiction credit on their Massachusetts Form 1-NR/PY.
The credit is allowed for income 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;
- Canada or any of its provinces; and
- New Hampshire for business profits tax..
The credit is not allowed for: taxes paid to the U.S. government or a foreign country other than Canada; city or local tax; and interest and penalty paid to another jurisdiction.
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.