MA Gross, Adjusted Gross, and Taxable Income for Nonresidents

Nonresidents are only taxed on their Massachusetts gross income. Find out what Massachusetts gross income specifically includes/excludes and learn how to calculate your Massachusetts gross, adjusted gross, and taxable income as a nonresident.

Page updated: January 16, 2024

Table of Contents

Included in Massachusetts gross income

Calculating Massachusetts gross income

  Form 1-NR/PY, Line 12 (income from Massachusetts sources)
+ Schedule B, Line 35 (interest, dividends, and short-term capital gains)
+ Schedule D, Line 19 (long-term capital gains)
= Massachusetts gross income

Massachusetts gross income includes income from sources within Massachusetts. It specifically includes income:

  • Gained from or connected with any trade or business, whether or not you were actively engaged in a trade or business or employment in Massachusetts in the year you received income from:
    • Compensation for personal services performed in Massachusetts, regardless of where paid. This includes but is not limited to wages, salaries, tips, bonuses, commissions, fees, and other compensation related to activities carried on in Massachusetts, regardless of where the compensation is paid. In the case of compensation for personal services, report all Massachusetts source income even though you didn't receive the entire amount. For example, include employer withholdings for federal income taxes, FICA contributions, medical insurance plans, or other similar withholding deductions in Massachusetts source income.
    • Payments from non-compete clauses/covenants not to compete, which pay over a number of years. Later payments are Massachusetts source income if the original clause was based on your Massachusetts activity.
    • Deferred compensation. This does not include qualified pension income or any income from retirement plans that are exempt from state taxation under federal law.
    • Disability income
    • Distributive share income from a partnership or S corporation. Distributions based on an ownership interest in an entity doing business in Massachusetts, whether in the form of dividends or any other category of income.
    • Nonqualified pension benefits that are federally taxable.
    • Selling a business or interest in a business
    • Severance and accumulated sick leave
    • Stock options (nonqualified) granted or connected to employment, or to conducting a trade or business in Massachusetts
    • Stock ownership as part of compensation for personal services in Massachusetts
    • Taxable unemployment compensation. Your taxable unemployment compensation from employment both in Massachusetts and elsewhere is equal to the amount you were paid in Massachusetts or charged to Massachusetts divided by the amount paid in Massachusetts and elsewhere.
  • From any lottery or wagering transactions in Massachusetts. For nonresidents, these include:
    • Casinos and slots parlors located in Massachusetts
    • The Massachusetts lottery
    • Multi-jurisdictional lottery if the ticket was bought within Massachusetts
    • Pari-mutuel wagering paid by Massachusetts racetrack or simulcast center
    • Any other wagering transaction within Massachusetts
  • From owning real or tangible personal property in Massachusetts. This includes (but isn't limited to) rent, gains, and interest from selling or exchanging:
    • Real property located in Massachusetts
    • Tangible personal property legally located in Massachusetts
    • Any interest in a Massachusetts cooperative housing corporation
    • Any interest in a Massachusetts timeshare (or similar arrangement)
  • From patents, copyrights and other similar intangibles. This includes:
    • Royalties from licensing a patent or copyright, and income from licensing a design, idea or other similar intangible to a person for use or production in Massachusetts.
    • Income from selling or exchanging patents, copyrights, designs, ideas or other similar intangible, if gained from or connected with a trade or business in Massachusetts.
  • Other income. All other types of income that fall within the definition of Massachusetts source income.

In general, nonresidents and residents have the same deductions and exemptions to determine taxable income. These items are allowed, however, only to the extent that the deductions and exemptions relate to Massachusetts source income. For specific rules about allocating such deductions and exemptions, use the Nonresident Deduction and Exemption Ratio on Massachusetts Form 1-NR/PY, Line 14g.

Also visit Directive 03-12: Taxation of Income Earned by Nonresidents After St. 2003, c. 4, s. 7.

Excluded from Massachusetts gross income

Massachusetts gross income excludes certain income from sources within Massachusetts:

  • Non-business related interest
  • Dividends and gains from selling or exchanging certain intangibles, and
  • Qualified pension income

Specifically, it excludes:

  • U.S. military compensation paid to active members of the Army, Navy, Air Force, Coast Guard and Marines assigned to a military air base, naval station, or any public or private facility in Massachusetts
  • Income from certain intangibles (e.g. annuities, interest, dividends, and gains from selling or exchanging intangibles) unrelated to:
    • Massachusetts employment 
    • Massachusetts business
    • Selling or exchanging real or tangible Massachusetts personal property
    • Massachusetts source income received by a nonresident who is a citizen of a foreign country. 
  • Pension income from any U.S. government or Massachusetts contributory annuity, pension, endowment or retirement fund you contributed to
  • Qualified pension income, which is anything you receive under:
    • A tax-exempt qualified trust
    • Simplified employee pension plans
    • Annuity plans and annuity contracts
    • Individual retirement plans
    • Eligible deferred compensation plans of state and local governments and tax exempt organizations
    • Government plans
    • Trusts described
    • Any plan, program or arrangement described in I.R.C. § 3121(v)(2)(C) if you paid at least annually and spread payments over the actuarial life expectancy of the beneficiaries, or if you spread payments over at least 10 years
    • Non-contributory government plans, and
    • Nonresident military pensions.

If the United States has a tax treaty with another country, Massachusetts will recognize the treaty and exclude income to the extent it is excluded federally. However, you must include the income you received in your Massachusetts gross income and report it 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 is more than the requirement for filing a tax return, which is the smaller of $8,000 or the prorated exemption.

Trade, business or employment for nonresidents

You have a trade or business in Massachusetts if you, directly or through agents or employees:

  • Maintain, operate, or share in maintaining or operating a desk, a room, an office, a shop, a store, a warehouse, a factory, or any other place in Massachusetts where business is regularly conducted, or
  • Are present for business in Massachusetts as an employee, sole proprietor, or other self-employed individual

You're not engaged in a trade or business in Massachusetts if your presence for business is casual, isolated and inconsequential. Your presence for business in Massachusetts is casual, isolated, and inconsequential if it meets the Ancillary Activity Test (AAT) requirements.

Ancillary Activity Test (AAT) requirements

Your presence for business in Massachusetts is "ancillary", or secondary to your main duties, if your occasional presence in Massachusetts for:

  • Management reporting or planning
  • Training
  • Attending conferences or symposiums, and
  • Other similar activities

Is secondary to your primary out-of-state duties that you perform outside of Massachusetts.

Examples of ancillary activities:

  • A dentist employed by a Maine health organization comes to Massachusetts for a 6-week training course
  • The president of a Texas corporation flies to Boston to meet a customer and then flies back to Texas without being scheduled to return
  • The West Coast sales manager of a Massachusetts corporation performs all her duties in California, but flies to Boston once a year for a 2-week symposium and training sessions as needed

Examples of carrying on business in Massachusetts (and therefore not ancillary):

  • A regional manager of a Maine shoe manufacturer spends 1 week each month managing their Massachusetts retail stores
  • A nonresident has a small store in New Hampshire but also sells gift items from a pushcart in Boston during the Christmas shopping season
  • A former politician from California makes a living as a public speaker and is paid to deliver a speech at a convention in Massachusetts
  • An attorney who primarily practices in New York City appears in court in Massachusetts every day for 4 weeks due to a pending lawsuit in Massachusetts, even though all the trial preparation happened in New York
  • An engineer who works in the Illinois office of a Massachusetts-based corporation is sent to their Massachusetts headquarters to review and develop software, and receives her regular salary during her 6 months there

When you're present in both Massachusetts and elsewhere on the same day, that day will be treated as 1 full day spent present for business in Massachusetts.

Apportioning Massachusetts income

If you work both inside and outside of Massachusetts, determine your Massachusetts gross income by using 1 of the methods below. The only part of your income that gets taxed is the amount you get within Massachusetts.

Due to the COVID-19 pandemic the determination of working days outside of Massachusetts for remote workers may be affected for tax years 2020 and 2021. See Technical Information Release 20-15Revised Guidance on the Massachusetts Tax Implications of an Employee Working Remotely due to the COVID-19 Pandemic, Directive 21-1: Personal Income Tax Guidance for Employees who Telecommuted in 2020 due to the COVID-19 State of Emergency, and regulation 830 CMR 62.5A.3.

3 most common apportionment methods

  • Employees compensated hourly, daily, weekly or monthly: Multiply gross income by the number of days spent working in Massachusetts, including days treated as being in Massachusetts due to COVID-19, and then divide by total working days. Total working days exclude weekends, holidays, sick days, vacations, and paid or unpaid leave.
  • Employees compensated on a mileage basis: Multiply gross income by total mileage traveled in Massachusetts, and then divide by the employee's total mileage upon which the employer computes total wages.
  • Salesperson: Multiply gross income by the amount of sales made within Massachusetts, and then divide by amount of sales made everywhere.

If you're a self-employed nonresident, your tax return must reflect your trade or business's gross income (wherever it's from), the amount you apportioned to Massachusetts, and the basis you used to determine it.

Nonresident professional team athletes

A professional athletic team includes (but is not limited to) any professional:

  • Baseball
  • Basketball
  • Football
  • Soccer, or
  • Hockey team

Members of a professional athletic team include (but are not limited to):

  • Employees who are active players
  • Players on the disabled list
  • Coaches
  • Managers
  • Trainers
  • Anyone who travels with and performs services on behalf of the team on a regular basis

Determine your Massachusetts source income by multiplying your total compensation for services by the number of duty days in Massachusetts, and then divide by your total number of duty days everywhere.

Total compensation for services includes:

  • Salaries,
  • Wages,
  • Performance bonuses,
  • Pay for:
    • Championship
    • Playoff
    • Bowl games
    • Selection to all-star play. 

However, the original signing bonus you received is excluded from total compensation if all of the following conditions are met:

  • It is not conditional upon the signee performing services (such as making the team or playing any games)
  • It is payable separately from salary and other compensation, and
  • It is nonrefundable

Duty days are all days from the initial pre-season training day through the last day of competition (e.g. game days, practice days, days spent at team meetings and promotional "caravans and training" camps).

If you're a nonresident professional athlete but not a member of a professional athletic team, you follow the same tax rules as nonresident entertainers.

Nonresident entertainers

If you're a nonresident entertainer, your Massachusetts source income is generally the entire amount you received for a performance or engagement you performed in Massachusetts.

If you're not paid specifically for a performance in Massachusetts, get your apportionment by multiplying your total annual compensation by the number of performances in Massachusetts, and then divide by the total number of performances you performed under the contract.

Nonresident flight crew members and air carrier employees

You're considered a nonresident flight crew member if you're involved in providing services on aircraft during flight (e.g. pilots and flight attendants). You'll be taxed the same way Massachusetts nonresidents are.

You're considered a nonresident air carrier employee (a subset of flight crew members) if you're an operator who needs to have an air carrier certificate because of your commercial flight activities or because of the size of your aircraft. You'll only be taxed if you earn more than 50% of your pay in Massachusetts, meaning that your scheduled flight time in Massachusetts is more than 50% of your total scheduled flight time when employed during the year.

When you can't establish the exact amount of pay you received for services you performed in Massachusetts, calculate how much you owe in taxes by:

  1. Multiplying your gross income related to your employment (wherever earned) by the number of your Massachusetts workdays (any workday that you flew out of Massachusetts or any day you spent even part of in Massachusetts), and then
  2. Dividing by your total workdays (all days that you were either flying or required to be on-duty).

Passive activity and losses

When reporting for federal purposes, take out passive activity income and losses that aren't attributed to Massachusetts. For Massachusetts purposes, recalculate the allowed passive activity losses based on income or losses from passive activities that generate income subject to Massachusetts tax. Do this by completing Form 8582, using only the amounts from activities that generate income subject to Massachusetts tax.

When calculating Form 8582, limit the allowance amount ($25,000) for rental real estate activities with active participation to the amount you were allowed for federal purposes. If you have a gross income of $100,000 or more, this lowers or gets rid of the offset allowance.

Massachusetts adjusted gross income

Calculate your Massachusetts adjusted gross income (AGI) as if you were a full-year Massachusetts resident. Include Massachusetts gross income from all your sources.

Calculating Massachusetts AGI

  Form 1-NR/PY, Line 12 (income from Massachusetts sources)
+ Schedule B, Line 35 (interest, dividends, and short-term capital gains)
+ Schedule D, Line 19 (long-term capital gains)
Schedule Y, Lines 2 - 10 and Line 18
Schedule B adjustments
Schedule D adjustments
= Massachusetts AGI (that would be included if you were a full-year resident)

Your Massachusetts AGI affects:

  • No Tax Status (NTS) – Fill out Schedule NTS-L-NR/PY. If you're required to file, you may still qualify for this status depending on your Massachusetts AGI.
  • Limited Income Credit (LIC) – Fill out Schedule NTS-L-NR/PY. If you're required to file but do not qualify for NTS, you may qualify for this credit depending on your Massachusetts AGI.

Schedule NTS-L-NR/PY – Non-Massachusetts source AGI

Schedule NTS-L-NR/PY (Line 7), Massachusetts income that you would include if you were a full year Massachusetts resident, minus Schedule NTS-L-NR/PY (Line 9), additional adjustments to income that would be allowed if you were a full-year Massachusetts resident.

For more information visit Learn about No Tax Status and Limited Income Credit.

Massachusetts taxable income

Massachusetts taxable income is Massachusetts AGI minus:

  • Form 1-NR/PY, Lines 15 – 18
  • Schedule Y, Lines 11 – 14
  • Exemptions

Calculating Massachusetts taxable income

  Massachusetts adjusted gross income
Form 1-NR/PY, Lines 15 – 18
Schedule Y, Lines 11 – 14
= Massachusetts taxable income

For more information visit View Massachusetts personal income tax exemptions.

Total federal income (Form 1-NR/PY, Line 3 & 14F)

Line 3

Total federal income (Form 1-NR/PY, Line 3) is the federal gross income reported to the IRS. This amount is only for informational purposes, and you get it from:

  • U.S. 1040, Line 9
  • U.S. 1040NR, Line 9.

Form 1-NR/PY, Line 3 can be a negative number. It includes income that is excluded from Massachusetts gross income, and excludes income that is included in Massachusetts gross income.

Total federal income excludes:

  • 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
  • Net operating loss carry forward.

Total federal income includes:

  • 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
  • State tax refunds.

Line 14F

Form 1-NR/PY, Line 14d, Total income this return:

Nonresident Massachusetts gross income (from sources within Massachusetts). Add Lines 14a through 14c.

Form 1-NR/PY, Line 14e, Non-Massachusetts source income: 

Any additional income that you would include if you were a full year Massachusetts resident.

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

Add Line 14d and Line 14e, which is Massachusetts gross income from all sources (e.g. nonresident Massachusetts gross income) plus income that you would include if you were a full year Massachusetts resident.

Income included in Line 3 but 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
  • State tax refunds.

Income excluded in Line 3 but 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
  • Net operating loss carry forward.

Line amounts cannot be negative numbers. Enter losses as 0.

Total income on Line 14 will not necessarily be the same as Line 3 (total federal income). The following are not considered Massachusetts gross income and thus not added back to the total income in Line 14f:

  • Social security benefits
  • U.S. bond interest
  • Massachusetts government pension.

Composite returns (Form NRCR) for nonresidents (Including professional athletic teams)

A pass-through entity can file a composite return on behalf of qualified electing nonresidents who report and pay income tax on their proportional or distributed share of Massachusetts source income of the pass-through entity. A partnership, S corporation, or a trust or estate can file an electronic composite return on Form MA NRCR and make estimated tax payments as an agent on behalf of 2 or more qualified electing nonresident members.

Eligible members of a composite return must:

  • Be an individual or the estate or trust of a deceased nonresident partner
  • Be nonresidents for the entire taxable year
  • Elect to be included in the composite return by signing a statement
  • Agree to be subject to Massachusetts tax jurisdiction, and
  • Waive the right to claim deductions, exemptions, and credits allowable under M.G.L Chapter 62, Sections 3, 5 and 6.

Form MA NRCR Frequently Asked Questions

Can Form MA NRCR be filed on paper?

No. Form MA NRCR can only be filed electronically, either through MassTaxConnect or commercial software. If Form MA NRCR is submitted on paper, it will not be processed by DOR and the return will be considered not filed. The only paper alternative is for each partner or shareholder to file their own Form 1-NR/PY.

Can I claim withholding paid by another entity on Form MA NRCR? 

Yes. Use line 17 on Form MA NRCR, beginning with forms for the 2021 tax year, to report all MA income taxes withheld as shown on your copies of forms or schedules W-2G, PWH-WA, LOA, 2G, K-1, 2K-1, 3K-1 and certain Forms 1099 if applicable. See also instructions for Form MA NRCR. 

How will DOR verify the withholding amounts claimed on Form MA NRCR?

Form MA NRCR must include the Massachusetts K-1 for each member of the composite return. The return should not include any K-1’s for members of the originating entity who are not members of the composite return. Returns filed without the appropriate Massachusetts K-1’s may be rejected.

What should I do if a member of the composite return claims the same withholding that was included on Form MA NRCR on their individually filed Form 1-NR/PY? 

The same income and/or withholding cannot be reported on both Form MA NRCR and Form 1-NR/PY. If this occurs, one of the two tax returns must be amended.  

Can a credit for the elective Pass-through Entity (PTE) excise be claimed on Form MA NRCR? 

Yes. A PTE filing Form NRCR on behalf of its participating nonresident members may claim the sum of all PTE credits allocable to the members who have elected to participate in the Nonresident Composite Return. The credit can be claimed on Form MA NRCR line 22. See PTE Excise Frequently Asked Questions for more information.

Composite returns by professional athletic teams

Any professional athletic team with 2 or more qualified electing nonresident team members can file a composite tax return as an agent for the qualified electing nonresident team members. Each electing nonresident team member must sign, under penalties of perjury, a statement stating their qualifications and election to file a composite return.

File the composite return on Form 1-NR/PY (not Form MA NRCR) along with the applicable schedules and attachments. The total Massachusetts gross income on the composite Form 1 NR/PY must be the sum of all the qualified electing nonresident partners' Massachusetts source income.

Contact   for MA Gross, Adjusted Gross, and Taxable Income for Nonresidents

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