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Guide Personal Income Tax for Residents

This guide has general information about Personal Income tax for Massachusetts residents. It is not designed to address all questions which may arise nor to address complex issues in detail. Nothing contained herein supersedes, alters or otherwise changes any provision of the Massachusetts General Laws, Massachusetts Department of Revenue Regulations, Department rulings or any other sources of the law.

Table of Contents

Introduction

5.1% personal income tax rate for tax year 2018

For tax year 2018, Massachusetts had a 5.1% tax on both earned (salaries, wages, tips, commissions) and unearned (interest, dividends and capital gains) income. The tax rate was lowered to 5.05% for tax years beginning January 1, 2019, and after. Certain capital gains are taxed at 12%. 

Everyone whose Massachusetts gross income is $8,000 or more must file a Massachusetts personal income tax return on or by April 15th following the end of every tax year. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is the next business day.

If you've made an error on a return you've already filed, file an amended return.

Yearly Tax Changes

Before filling out your yearly personal income tax return, it's a good idea to check if there have been tax changes.

For 2018, there have been changes to:

NotePrior year Massachusetts Personal Income tax law changes can be found within the Form 1 and Form 1-NR/PY instruction booklet for any given year.

Key Actions for Yearly Tax Changes

Filing Requirements

Full-year residents

If you're a full-year resident with an annual Massachusetts gross income of more than $8,000, you must file a Massachusetts tax return.

You're a full-year resident if:

  • Your home is in Massachusetts for the entire tax year, or
  • Your home is not in Massachusetts for the entire tax year but you:
    • Maintain a home in Massachusetts, and 
    • Spend a total of more than 183 days of the tax year in Massachusetts, including days spent partially in Massachusetts.

Full-year residents use the Form 1 - Massachusetts Resident Income Tax Return.

Part-year residents

If you're a part-year resident with an annual Massachusetts gross income of more than $8,000, you must file a Massachusetts tax return.

You're a part-year resident if you:

  • Move to Massachusetts during the tax year and become a resident, or
  • Move out of Massachusetts during the tax year and end your status as a resident. 

Part-year residents use Form 1-NR/PY - Massachusetts Nonresident or Part-Year Resident Income Tax Return.

Nonresidents

If you're a nonresident with an annual Massachusetts gross income of more than either $8,000 or the prorated personal exemption, whichever is less, you must file a Massachusetts tax return.

You're a nonresident if you are neither a full-year nor a part-year resident.

Nonresidents use Form 1-NR/PY - Massachusetts Nonresident or Part-Year Resident Income Tax Return.

Filing Extensions

You automatically get a 6-month extension to file your Massachusetts income tax return as long as you've paid at least 80% of the total amount of tax due on or before the due date, and you're filing:

  • Form 1
  • Form 1-NR/PY
  • Form 2
  • Form 2G
  • Form 3
  • Form 3M
  • Form M-990T-62
  • Form NRCR, or
  • An estate filing Form M-706

Once it's granted, the 6-month extension runs from the original due date for filing the return. You can file your return anytime during the extension period. An extension to file a return doesn't extend the due date for paying any tax due.

Estates seeking a time extension to pay the estate tax must still request approval from DOR by filing Form M-4678. You can file Form M-4678 electronically.

If an extension payment is required to reach the 80% threshold, you should pay electronically. If you need to pay $5,000 or more to qualify for an extension, you must pay electronically.

Farmers or fishermen who miss the March 1 deadline will not be penalized if they file and pay by April 15. This penalty exception is explained on Form M-2210. If you qualify for this exception, include Form M-2210 with your tax return, whether you file electronically or on paper.

Taxpayers affected by presidentially declared disasters in the United States automatically get an extension for filing returns and submitting tax payments. The due date and payment date for returns and payments is extended for a specified period of time announced by the IRS unless we publicly announce otherwise. This extension covers filing tax returns, paying tax (including estimated tax), and filing tax extension forms with us.

Filing Status

For federal purposes, your filing status determines your income tax rate. For Massachusetts purposes, your filing status determines how many personal exemptions you're allowed. For federal purposes, there are 5 filing statuses:

  • Single
  • Married filing a joint return
  • Married filing a separate return
  • Head of household
  • Qualifying widow(er) with dependent child

Massachusetts offers all but the qualifying widow(er) with dependent child. Generally, if you claim this status federally, you qualify for head of household for Massachusetts.

View more detailed information on filing status.

Reporting on your original tax return

Enter your filing status on either Form 1 or 1-NR/PY, Line 1, and fill in the appropriate oval. Enter your spouse's Social Security number in the appropriate space at the top of the return under taxpayer's Social Security number. If you're married filing joint, both spouses must sign the return.

Exemptions

Personal income tax exemptions directly reduce how much tax you owe. Exemptions are generally related to your filing status and number of dependents you report on your tax return, but not always.

Exemption Description Where to report
Adoption

You're allowed an exemption for fees you paid to a licensed adoption agency to adopt a minor child. 

The exemption is for:

  • The full amount of the fees paid during the taxable year, and
  • Includes fees you paid in the taxable year to an adoption agency for the adoption process of a minor child, regardless of whether an adoption actually takes place during the taxable year
Form 1 (Line 2f) or Form 1-NR/PY (Line 4f)
Age 65 or over

$700 exemption for each taxpayer who is age 65 or over by the end of the tax year.

If filing a joint return, each spouse may be entitled to a $700 exemption if each is age 65 or over on December 31st of the tax year.
Form 1 (Line 2c) or Form 1-NR/PY (Line 4c)
Blindness

$2,200 exemption for each taxpayer or spouse who is legally blind at the end of the taxable year.

You're legally blind for Massachusetts purposes if your visual acuity with correction is 20/200 or less in the better eye, or if your peripheral field of vision has been reduced to a 10-degree radius or less.
Form 1 (Line 2d) or Form 1-NR/PY (Line 4d) 
Dependent

$1,000 exemption for each dependent claimed who qualifies for a U.S. dependent exemption under the Internal Revenue Code. This exemption does not include your or your spouse.

Dependent means either:

  • A qualifying child, or
  • A qualifying relative
Enter number of dependents from your federal return into the box on your Form 1 (Line 2b) or Form 1-NR/PY (Line 4b)
Excess

If your allowable exemption amounts are greater than your Total Income (Form 1, Line 10 or Form 1-NR/PY, Line 12), you can deduct the difference from the income you report on Schedule B and Schedule D.

Complete the "Schedule B, Line 36 and Schedule D, Line 20" worksheet section (from page 11 of the Form 1 instructions or page 16 of the Form 1 NR/PY instructions) or calculate the exemption online.
Enter the amount from Line 5 of the worksheet on Schedule B (Line 36), and enter the amount from Line 8 of the worksheet on Schedule D (Line 20).
Massachusetts bank interest

$200 (if married filing jointly) or $100 (for all other filing statuses) for reporting Massachusetts bank interest.

Massachusetts bank interest includes total amount of interest received or credited to deposit accounts (term and time deposits, including certificates of deposit,  savings accounts, savings shares, and NOW accounts.)
Form 1 (Line 5b) or Form 1-NR/PY (Line 7b)
Medical/dental

An exemption is allowed for federally allowed medical, dental and other expenses paid during the taxable year. Itemize deductions on your Form 1040 - U.S. Individual Income Tax Returns.

If you itemize on U.S. Schedule A and have medical/dental expenses greater than 7.5% of federal AGI, you can claim a medical and dental exemption in Massachusetts equal to the amount you reported on U.S. Schedule A (Line 4).
Amount from U.S. Schedule A, Line 4 on Mass Form 1, Line 2e, or Form 1-NR/PY, Line 4e
Personal If you file a Massachusetts tax return, you're entitled to a personal exemption whether you can claim a personal exemption on your federal return or not. Your personal exemption amount depends on your filing status. Form 1 (Line 2a) or Form 1-NR/PY (Line 4a)

Benefits (Mass. and Federal Excluded Income)

Calculating Income

To find out how much tax you have to pay, first calculate your Massachusetts gross income, which is income from whatever source derived including (but not limited to) the compensation for:

  Calculating Massachusetts gross income
  Federal gross income (Form 1, Line 10 or Form 1-NR/PY, Line 12 for part-year residents and nonresidents)
+ Income excluded from federal but included in Massachusetts
- Income included in federal but excluded from Massachusetts
- Income excluded from both federal and Massachusetts
= Massachusetts gross income

Next, calculate your Massachusetts adjusted gross income (AGI) to get your Massachusetts taxable income and find out if you qualify for No Tax Status (NTS) or Limited Income Credit (LIC).

  Calculating Massachusetts AGI
  Federal gross income (Form 1, Line 10 or Form 1-NR/PY, Line 12 for part-year residents and nonresidents)
+ Schedule B, Line 35 (interest, dividends, and short-term capital gains)
+ Schedule D, Line 19 (long-term capital gains)
- Schedule Y, Lines 1 - 10
- Schedule B adjustments
- Schedule D adjustments
= Massachusetts AGI

Your Massachusetts taxable income is your Massachusetts adjusted gross income minus the following deductions:

Deductions

Personal income tax deductions decrease your taxable income, which means you owe less taxes. Deductions are generally related to your expenses, but not always.

Deduction Where to report
Abandoned building renovation Schedule C or E
Alimony paid Schedule Y, Line 3
Allowable excess trade or business Schedule C-2
Attorney fees and court costs Schedule Y, Line 9
Certain Business Expenses of National Guard and Reserve Members Schedule Y, Line 9
Certain Business Expenses of Qualified Performing Artist Schedule Y, Line 9
Certain Business Expenses of State and Local (Free-Basis) Government Officials Schedule Y, Line 9
Childcare Expenses for Child under Age 13 or Disabled Dependent or Spouse Form 1, Line 12
Claim of Right Schedule Y, Line 14
College tuition Schedule Y, Line 11
Commuter deduction Schedule Y, Line 15
Renting out personal property for profit Schedule Y, Line 9
Dependent Member(s) of Household under Age 12, or Dependents Age 65 or Older, or Disabled Dependents Form 1, Line 13
Depreciation Schedule C or E
Gambling activities  
Health Savings Account (HSA) Schedule Y, Line 8 
Human organ donation Schedule Y, Line 16
Incapacitated firefighter or police officer income exclusion Schedule Y, Line 4
Jury duty pay remittance Schedule Y, Line 9
Medical Savings Account (Archer MSA) Schedule Y, Line 6
Moving expenses Schedule Y, Line 5
Nonresident and part-year resident  
Out-of-state employee contributory government pension Schedule Y, Line 13
Partnership and S corporation Schedule E
Penalty on withdrawing savings early Schedule Y, Line 2
Reforestation amortization and expenses Schedule Y, Line 9
Rent paid Form 1, Line 14
Repayment of supplemental unemployment benefits Schedule Y, Line 9
Section 179 expenses  
Self-employed health insurance Schedule Y, Line 7
Social Security (FICA) and Medicare Form 1, Line 11a and 11b, if MFJ
Federal student loan interest Schedule Y, Line 10
MA undergraduate student loan interest Schedule Y, Line 12
Trade or business expenses Schedule C or E
Income exclusion for U.S. tax treaties Schedule Y, Line 4

Key Actions for Deductions

Credits

You may also qualify for certain personal income tax credits, which can reduce the amount of tax you owe.

Estimated Tax Payments

As a taxpayer, you must make estimated payments if the expected tax due on your taxable income not subject to withholding is more than a certain amount. Generally, you need to pay at least 80% of your annual income tax liability before you file your return for the year. You pay through withholding and making estimated tax payments on any income not subject to withholding. Learn more.

Refunds and Credit of Overpayments

When you pay more taxes (i.e., withholding taxes or estimated taxes) than the amount of taxes determined to be due an overpayment may be generated on your account for that tax type. An overpayment may also be generated if you are entitled to a refundable credit that exceeds the amount of tax due. Additionally, when you file an amended return or an abatement application to reduce the amount of tax due, and you previously paid more than what is now shown as due, an overpayment may be generated.

An overpayment claimed on a return may be applied as a credit for your next year’s tax due or you may request that it be refunded to you. An overpayment may also be offset or intercepted by the Department of Revenue and applied to another liability. However, often an overpayment is refunded directly to you.

Most refunds are claimed on an original return and will be issued automatically by the Department. For e-filed returns the turnaround time is about 4-6 weeks; but for paper returns it could take up to 10 weeks. You must claim your refund or credit within a certain time period, as further detailed below. Also, the Department of Revenue must issue refunds within a certain time period or pay interest on the amount of the refund. This page contains important information on the time limitations for claiming a refund and on the calculation of interest.

Visit Refunds and credit of overpayments to learn more. 

Use Tax on Out of State Purchase Payments

Use tax is a 6.25% tax paid on out-of-state or out-of-country purchases that are used, stored or consumed in Massachusetts and on which no Massachusetts sales tax (or less than 6.25%) was paid.

Unlike the 6.25% sales tax, which is collected by sellers, use tax is generally paid directly to the state by the purchaser.

Individual use tax is due by April 15th of the following year after your purchase. Learn more.

Image credits:  Filing document (Shutterstock)
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