Massachusetts tax law distinguishes between residents and nonresidents. Residents are generally taxed on all of their income; nonresidents are only taxed on their Massachusetts source income. As a Massachusetts resident or part-year resident, you are required to file an income tax return if your gross income from all sources (received inside and/or outside of Massachusetts) exceeds the filing requirement threshold of $8,000. As a nonresident, you are required to file an income tax return with Massachusetts if your Massachusetts source income exceeds the smaller of $8,000 or your prorated personal exemption (the amount of your personal exemption multiplied by the ratio of your Massachusetts income to your total income).
If you recently moved to or from Massachusetts or are a nonresident who works in Massachusetts, you may find the following information useful when filing your taxes.
- A Guide to the Department of Revenue: Your Taxpayer Bill of Rights
- 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
- Directive (DD) 03-12: Taxation of Income Earned by Non-Residents after St. 2003, C. 4, Section 7
1. Which filing options are available to nonresidents and part-year residents?
Filing your taxes electronically means faster refunds. You have the following filing options:
- you can use a DOR approved tax filing website or software and file your return online;
- you may also file your return electronically through a Massachusetts approved paid preparer.
If you prefer to use computer generated forms, for faster processing, consider using a product that incorporates 2-D barcodes which contain all the information on the return in an encoded format.
Otherwise, you may still submit a paper Form 1-NRPY file size 1MB .
2. How do I determine my residency status?
Massachusetts tax law defines residency status as follows:
You are a Full-year Resident if your legal residence (domicile) was in Massachusetts for the entire taxable year or if you maintained a permanent place of abode in Massachusetts and spent in the aggregate more than 183 days of the taxable year in Massachusetts, including days spent partially in and partially out of Massachusetts. Note: A day in Massachusetts while on active duty in the United States Armed Forces is not counted. If you fit this description, you should file Form 1, Massachusetts Resident Income Tax Return. For more information, please see TIR 95-7.
You are a nonresident if you are not a resident or inhabitant of Massachusetts as defined above. If you received Massachusetts source income during the taxable year (e.g., from a job in Massachusetts), you must report such income by filing Form 1-NR/PY, Massachusetts Nonresident/Part-year Resident Income Tax Return.
You are a Part-year Resident if you moved to Massachusetts during the taxable year and became a resident, or you terminated your status as a Massachusetts resident during the taxable year to establish a residence outside the state. Part-year residents must file Form 1-NR/PY, Massachusetts Nonresident/Part-year Resident Income Tax Return.
If you were both a Massachusetts resident for part of the year and a nonresident with Massachusetts source income for another part of the year, you must file Form 1-NR/PY and complete Schedule R/NR to calculate the portion of income earned while a part-year resident and the portion of income earned while a nonresident.
Married couples who do not have the same period of residency during the tax year cannot file a joint return.
3. What is Massachusetts source income for nonresidents?
Massachusetts gross Income includes items of income derived from sources within Massachusetts, including income:
- derived from or effectively connected with any trade or business, including any employment carried on by the taxpayer in Massachusetts, regardless of the year in which that income is actually received by the taxpayer and regardless of the taxpayer's residence or domicile in the year it 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
- all other types falling within the definition of Massachusetts source income.
4. 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 will be considered casual, isolated and inconsequential if it meets the Ancillary Activity Test (AAT).
Under the AAT, a nonresident's presence for business in Massachusetts is ancillary to his/her primary business or employment duties performed at a base of operations outside Massachusetts if the nonresident's occasional presence in Massachusetts for management reporting or planning, training, attendance at conferences or symposia, and other similar activities is secondary to his primary out-of-state duties.
A more in-depth explanation is available in the Nonresident Trade or Business, Including Employment Carried on in Massachusetts section of a Guide to Taxes.
5. 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.
6. 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.)
7. 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.
8. If I am not a resident, are my scholarships and/or grants subject to tax in Massachusetts?
Massachusetts has the same requirements as the Internal Revenue Service: qualified scholarships and grants are exempt from taxation in Massachusetts and not reportable on your tax return. Furthermore, Massachusetts does not impose tax on the portion designated as living expenses if received by nonresidents. Please see DOR Directive 95-9: "Tax Treatment of Scholarships and Grants for Residents and Nonresidents of Massachusetts"
9. 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.
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10. 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.
11. I am a nonresident who works 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.
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12. How do I calculate deductions and exemptions?
Massachusetts requires that deductions claimed by nonresidents and part-year residents either be prorated or directly related to income reported and taxed on Form 1-NR/PY. Deductions such as: FICA and medicare as reported on line 15 of Form 1-NR/PY or employee business expenses, moving expenses, penalty on early savings withdrawal, excluded income deductions on lines 4 and 13 of schedule Y need to be related to income taxed on Form 1-NR/PY .
Otherwise, the remaining deductions should be prorated as follows:
- Part-year residents will use the ratio listed on line 2 of Form 1-NR/PY.
- Nonresidents will use the ratio computed on line 14g of Form 1-NR/PY.
13. How do I compute credit for taxes paid to another jurisdiction on income I earned while a part-year resident of Massachusetts?
A Massachusetts full year and/or part-year resident is entitled to claim a credit for incomes taxes paid to other states on income reported and taxed in Massachusetts. No credit is allowed for city, local, property, excise taxes as well as for taxes paid to the federal government. The credit is, however, allowed for income taxes paid to the following jurisdictions:
- Any territory or dependency of the U.S including Puerto Rico, the Virgin Islands, Guam, the District of Columbia; and
- The Dominion of Canada.
The credit is the smaller of the apportioned Massachusetts tax and the tax paid on such income to the other jurisdictions.
Note: A part-year resident is only allowed credit for taxes paid on income earned and/or received during the Massachusetts residency period; nonresidents are not eligible for this credit.
- Make sure your W-2 reflects the correct amount of your Massachusetts wages. Otherwise, submit a corrected W-2 or a letter from your employer verifying the wages you are reporting or the apportionment method you are using.
- If the amount on line 14f exceeds the total income on line 3 by more than 10%, you should enclose a statement explaining the difference.
- Be aware that the deductions you are claiming on line 19 of Form 1-NR/PY as well as the deductions on schedule Y for employee business expenses, penalty paid on early savings withdrawal, income received while injured in the line of duty, income exempt under U.S. Tax treaty, moving expenses, self-employed health insurance deductions, miscellaneous deductions such as jury duty pay and qualified contributory pension from another state have to be related to income reported on your return.
- If you are a full year nonresident of Massachusetts, you are not entitled to credit for taxes paid to another state on the income reported on the Massachusetts return.
- If you are a full year nonresident of Massachusetts, you cannot report losses from sources out of Massachusetts.