As a Massachusetts resident or part-year resident, you're allowed a credit for taxes due to another jurisdiction. The credit is available only on income reported and taxed on a Massachusetts return. Note that tax due is different from taxes withheld. For this credit, use the calculated tax due, not tax withheld.
Nonresidents may not claim this credit on their Form 1-NR/PY.
This credit is allowed for taxes paid to:
- Other states in the U.S., including payments made under the Rhode Island Temporary Disability Insurance Act or other similar programs that meet all requirements and are essentially an income tax
- Any territory or dependency of the U.S., including:
- Puerto Rico
- The Virgin Islands
- The District of Columbia
- The Dominion of Canada or any of its provinces (You must first reduce the taxes you paid by the amount allowed as a federal Foreign Tax Credit on U.S. Form 1116, claimed or not.)
- New Hampshire Business Profits Tax (considered an income tax)
- District of Columbia Unincorporated Business Franchise Tax (UBT)
This credit is not allowed for:
- Taxes paid to the U.S. government
- Taxes paid to a foreign country other than Canada or any of its provinces
- Any city or local tax
- Interest and penalties paid on tax due to another jurisdiction
- Excise, property tax or franchise tax
The total credit calculated on the Form 1 or Form 1-NR/PY worksheet (for eligible part-year residents) is the smaller of:
- The amount of taxes due to other jurisdictions (net of certain adjustments), or
- The portion of your Massachusetts tax due on your gross income that is taxed in any other such jurisdiction
See if you qualify for this credit
- Residents - Complete the Form 1 Worksheet for Taxes Due Any Other State and Schedule OJC, Income Tax Due to Other Jurisdictions
- Part-year residents - Complete the Form 1-NR/PY Worksheet for Taxes Due Any Other State (part-year residents only) and Schedule OJC, Income Tax Due to Other Jurisdictions
Massachusetts resident taxpayers who are sole proprietors, shareholders, partners, or members of pass-through entities may be entitled to this credit for their share of taxes paid to another jurisdiction if certain criteria are met. See DOR Directive 19-1 for more information.
S corporations and their shareholders
If you're a Massachusetts shareholder of an S corporation, you may be eligible for this credit for a taxable year if the S corporation pays or has to pay a tax during your taxable year and all the following apply:
- The tax is required by another state, territory, or possession of the United States, or Canada or its provinces
- The tax is measured by income the S corporation earned. The distributive share of the income has to be included in shareholders' Massachusetts gross income. Credit for taxes paid to other states on property, net worth or excise tax is not allowed
- The S corporation does not deduct any part of the tax from its income when calculating net income available for distribution to shareholders
- The tax is otherwise allowed as a credit under the provisions of G.L. c. 62, § 6(a)
S corporation shareholders or partners must get a statement from the S corporation or partnership if they're claiming the credit as part of distributive income taxed in another jurisdiction. The statement must list the taxes paid on the shareholder's or partner's behalf and specify where the taxes were paid.
Gross receipts-based taxes
This credit only applies to taxes on net income. It does not extend to taxes based on or from gross receipts.
Gross receipts-based taxes are taxes for the privilege of doing business in a state. These taxes are not based on income, and are due whether a business is profitable or not. Therefore, these taxes are not similar to net income taxes imposed on taxpayers, either directly or by pass-through entities that taxpayers are members of.
Gross receipts-based taxes include:
- GRT - Washington Gross Receipts Tax
- GMT - Texas Gross Margin Tax
- CAT - Ohio Commercial Activity tax
Rhode Island Temporary Disability Insurance Act payments
For purposes of this credit, mandatory contributions made pursuant to the Rhode Island Temporary Disability Insurance Act qualify as income taxes paid to the state of Rhode Island.
All employees who do business in Rhode Island are required to contribute to the Rhode Island Disability Fund. The Act calculates these contributions according to employees' income, and the payments are placed in the Fund to be used to provide relief for residents who are unemployed due to a disability.
Include the Rhode Island State Disability Insurance (RISDI) contributions as part of the total tax you paid to Rhode Island. The credit is limited to the smaller of:
- Massachusetts income tax on the income you report to Rhode Island, or
- Actual tax plus any RISDI you paid not to exceed Massachusetts income tax
Similar programs that involve mandatory payments to a state, and are in the nature of an income tax (i.e., they are deducted from an employee's pay and are reported on a taxpayer's W-2) may be eligible for the credit. States that have such a program are
- New York
- New Jersey
Income taxed at a different rate
When calculating the allowable credit, prepare a separate calculation for each income item that is taxed at a different rate. For example, calculate your Part B income separately from your Part C income.
Reporting on original tax return
- Residents - Calculate the credit on the Form 1 Worksheet for Income Tax Due Any other State. If you qualify, enter the amount from Line 9 of the worksheet on Form 1, Line 30. Complete and include Schedule OJC, Income Tax Due to Other Jurisdictions.
- Part-year residents - Calculate the credit on the Form 1-NR/PY Worksheet for Taxes Due Any Other State (part-year residents only). If you qualify, enter the amount from Line 9 of the worksheet on Form 1-NR/PY, Line 34. Complete and include Schedule OJC, Income Tax Due to Other Jurisdictions.
Documents to submit with abatement/amended tax return
- Copy of your personal income tax return from the other state or jurisdiction
- Copy of your Massachusetts Form 1 or 1-NR/PY Worksheet from the instruction booklet, showing the correct calculated credit
- Copy of your federal tax return
- For income taxed at different rates - A separate worksheet for each rate of income
- For S corporation shareholders or partners - A statement from the S corporation or partnership showing the distributive income taxed in another jurisdiction. The statement must list taxes paid on the shareholder's or partner's behalf and where the taxes were paid
Page updated: March 2, 2020
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