Compensation for active service in a combat zone by members of the U.S. Armed Forces
Compensation received for active service in a combat zone by members of the Armed Forces of the United States is excluded from Massachusetts gross income.
Income earned for active service for any month during which a member below the grade of commissioned officer served or was hospitalized as a result of injuries received during service in a combat zone is excluded from gross income. A portion of such income earned by commissioned officers is also excluded.
Designated combat zones include/have included:
- Persian Gulf
- Sinai Peninsula of Egypt
Massachusetts gross income is based on federal gross income. Massachusetts adopts the Internal Revenue Code as of January 1, 2005.
Since the relevant federal provisions were enacted before January 1, 2005, Massachusetts excludes from income to the same extent as the Code, compensation earned by members of the Armed Forces for service in a combat zone.
Extensions — filing and payment deadlines for taxpayers serving in a combat zone
Military personnel serving in a combat zone (or are hospitalized due to serving) on the due date automatically get an extension to file income tax returns and to pay taxes due. The extension period begins after you:
- Leave the combat zone or
- You’re released from the hospital.
You can add an additional 180 days to file, starting on the day that you first entered the combat zone.
Designated combat zones include/have included:
- The Persian Gulf
- Sinai Peninsula of Egypt
You won't be charged interest on taxes or penalized during the extension period. The extension to file returns also applies to spouses of personnel serving in combat areas if a joint return is filed.
To claim a time extension to file a return or pay tax, write "COMBAT ZONE" on the income tax envelope and the top of the income tax return that you submit to us. If filing electronically, write "COMBAT ZONE" next to your name or on an address line (if necessary), along with the date of deployment.
The due date for filing Massachusetts income tax returns and paying tax is the same as the federal date, and calculated as follows:
|1.||The starting date is the date of departure from the combat area (or, if applicable, the termination date of combatant activities in the combat area).||Date of departing from combat area|
|2.||Add at least 180 days after the starting date stated above.||+ 180 days|
|3.||Add the days you had left to file from January 1 through April 15 before you left for the combat zone (up to 105 days).||+ (Days you had remaining in filing season, up to 105)|
|4.||Add days spent hospitalized, if any. Any period of continuous hospitalization as a result of injuries while serving, including hospitalization outside the United States and any period for up to 5 years of hospitalization within the United States. This does not apply to spouses.||+ (Days spent hospitalized)|
|5.||Add days spent in a missing status (missing in action or a prisoner of war), if any.||+ (Days spent missing)|
|6.||Get the total number of days you have to file your tax return and pay tax, starting from your departure date.||= Days you have from departure date to file and pay|
Residency status & filing requirements (Including Mass. and Non-Mass. domicile)
If you're a taxpayer who's enlisted in service as a Massachusetts resident and have not established legal residence elsewhere, you're still a Massachusetts resident. This applies even though you may be stationed outside of Massachusetts. If your gross income is more than $8,000, you file as a Massachusetts resident.
Nonresident military personnel who have not established a legal residence in Massachusetts and who are stationed in Massachusetts may meet the 183 days test but will usually not meet the permanent place of abode test since army barracks are not considered a permanent place of abode. You may however, have to report Massachusetts source income earned other than from military sources.
When determining whether you're a Massachusetts resident or not, a day you spend in Massachusetts while on active duty in the U.S. armed forces is not counted as a day you spent in Massachusetts. Thus, you or your spouse are not taxable under the 183 day rule even if you've spent more than 183 days on active duty in Massachusetts.
However, once you've spent more than 183 days in Massachusetts while not on active duty, you and your spouse are taxable as Massachusetts residents.
If you leave for service, your domicile is the same as it was before your service period, despite being absent for a long time from your state of domicile and residence in other jurisdictions. No changes happen until you establish a new residence with the intention to make it your new permanent home and decide not to return to your former residence. You will neither lose nor get a residence or domicile because you were absent or present in any tax jurisdiction in the U.S. on military orders.
Your income is considered to be earned in your state of domicile even if you're performing duties in another state.
If you're a Massachusetts resident who:
- Has not yet established domicile in another state
- Resides outside of Massachusetts solely to be with your spouse (who is a servicemember) while complying with military orders
- Earns income in that other state
You cannot choose your state of domicile. To change your state of domicile, you must:
- Have (or have had) a physical presence in the state, and
- Intend to one day make it your permanent home. This intent is determined by facts and circumstances such as:
- Owning property
- Registering to vote
- Titling and registering automobiles
- Preparing a will in the state
The spouse of a servicemember must be able to establish that he or she was domiciled in another state (the same domicile as the servicemember) before moving into Massachusetts and that he or she maintained the domicile in that other state.
Nonresident Massachusetts military service compensation
Military compensation you get for services you performed or from a tax jurisdiction of the U.S. is not considered income if you're not a resident of the place you're serving in under military orders. Military service compensation includes both:
- Compensation you earned as a member of the armed forces for serving in a combat zone. This is excluded from Massachusetts gross income.
- Any other military service compensation normally included in Massachusetts gross income.
If you're a member of U.S. uniformed military personnel who was assigned to a military post, base, or station within Massachusetts and compensated for services while on active duty, the compensation is considered to be from sources outside of Massachusetts.
As a nonresident taxpayer, if you're required to file in Massachusetts because you have MA source income other than military source income:
- When determining whether you qualify for NTS or LIC, do not include any military service compensation as non-Massachusetts source income. Specifically Line 7 of Schedule NTS-L-NR/PY should not include as non-Massachusetts source income any military service compensation received during the taxable year.
- When determining the deduction and exemption ratio, include military service compensation as non-Massachusetts source income. Include any military service compensation you received during the taxable year as non-Massachusetts source income on Form 1-NR/PY, Line 14e.
Massachusetts gross income (included and excluded)
- Military service compensation
- Compensation for active service in a combat zone by members of the U.S. armed forces
- Gain from sale of a principal residence
If you're eligible for excluding any part of a gain on selling a principal residence for federal income tax purposes, you may also exclude the same part of the gain for Massachusetts income tax purposes as well.
The maximum amount of gain from selling a principal residence that you can exclude is:
- $250,000 for a single, head of household, or married separate filer
- $500,000 for married joint filer
You may repeatedly qualify for this exclusion if the sale is for a principal residence you owned and used for at least 2 of the 5 years before the sale.
Only the part of a multiple residence (i.e. 1 unit of a 2-family residence) that is used as a personal residence qualifies for this exclusion.
Ownership test suspension for members of the uniformed or foreign services
You can also exclude the gain from selling a principal residence from your Massachusetts gross income if you or your spouse served on qualified extended duty as a member of the U.S. uniformed services or foreign service, or as an employee of the intelligence community.
You can suspend, for a maximum of 10 years, the 5-year test for ownership and use during any period you or your spouse serves outside the U.S. either as:
- An employee of the Peace Corps on qualified official extended duty, or
- An enrolled volunteer or volunteer leader of the Peace Corps
This means that you (or your spouse) may still be able to meet the 2-year use test even if, because of service, you did not actually live in the home for at least the required 2 years during the 5-year period ending on the date you sold the property.
You can't suspend the 5-year test period for more than 1 property at a time. You can take back your choice to suspend the 5-year period anytime. If you use the entire 10-year suspension period and don't live in your house again before selling it, the 5-year test period would start 15 years before the date you sold the property.
- Military fringe benefits
As a result of Code Update, Massachusetts adopts the following federal exclusions as amended and in effect on January 1, 2005:
- Dependent care assistance under a dependent care assistance program;
- Travel benefits received under the Operation Hero Miles program; and
- Increased death benefit gratuity of $12,000.
- The Operation Hero Miles program provides, through public and air and surface carriers, domestic travel for military personnel and their families through donated :
- Frequent flyer miles
- Tickets or
- Ticket vouchers.
- Military non-contributory pension
U.S. military pensions, which are included in federal gross income, are excluded from Massachusetts gross income.
U.S. military pensions are pensions from the following uniformed services:
- Air Force
- Coast Guard
- Commissioned Corps of the Public Health Services and National Oceanic and Atmospheric Administration
- Marine Corps
Junior Reserve Officers' Training Corps (JROTC)
- When you retired, you received a return of your contributions plus interest. The lump sum is not taxable.
- After receiving the lump sum, any pension amount received is considered non-contributory, and is taxable.
If you're a retired commissioned or noncommissioned officer, you can serve as an instructor or administrator in JROTC units. The military pays the institution half of the difference between your retired or retained pay and the active duty pay and allowance you would have received for that period if you were on active duty.
If you're employed under these rules, you're not considered to be on active duty or inactive duty training. Therefore, you can't exclude the pay from gross income.
For federal purposes, you can claim I.R.C. s.134 as a reference for excluding a substantial portion of your wage income. For s.134, "qualified military benefit" means any allowance or in-kind benefit you received as member or former member of the uniformed services of the United States which was excludable from gross income on September 9, 1986 under provisions of law.
Your entitlement to income from the JROTC program is not received due to your status as a member or former member of the uniformed services, but rather is received as compensation for services rendered.
Veteran's Pension - G.L. c. 32, Sections 56-60
If you retired under M.G.L. Chapter 32, Sections 56 - 60 and are a veteran who began state service before July 1, 1939, you're taxed on your pension as follows:
Spouses of military personnel
As a spouse of a servicemember, you may be exempt from Massachusetts personal income tax on income from services you performed if all the following apply:
- The servicemember must have declared "legal residence for purposes of withholding state income taxes from military pay" in a state other than Massachusetts
- The servicemember is present in or near Massachusetts in compliance with military orders
- You're in Massachusetts solely to be with the servicemember, and
- You're domiciled in the same state as the servicemember.
- The spouse of a servicemember must be able to establish that he or she was domiciled in another state (the same domicile as the servicemember) before moving into Massachusetts and that he or she maintained the domicile in that other state.
Income from services performed in Massachusetts that is exempt:
- Other income from services you performed
- Self-employment income if your business doesn't employ others, and doesn't employ significant capital, then the predominant source of your business' income is from your services and would qualify for the exemption. However, if your business employs others who perform services, then the predominant source of the business' income is not from your services and would not qualify for the exemption.
Income from services performed in Massachusetts that is not exempt:
- Items from or effectively related to participating in any lottery or wagering transaction in Massachusetts
- Owning any interest in real or tangible taxable personal property in Massachusetts
Military spouse wage withholding exemption
If you're the spouse of a service member and:
- Have your personal income tax withheld
- Are exempt from Massachusetts taxes
- Did not submit a Form M-4 MS
You can claim a withholding refund by filing a Form 1-NR/PY - Massachusetts Nonresident Income Tax Return.
- You must file the Form 1-NR/PY return on paper. Electronic filing is not allowed.
- Write "MSRRA" across the top of the Form 1-NR/PY and attach copies of the following:
- Your military spouse ID card
- Your Department of Defense Form 2058, State of Legal Residence Certificate
- Leave and Earnings Statement (LES) of service member, and
- Service member's current military orders assigning them to a post of duty in or near Massachusetts.
- Include the exempt wages that were subject to withholding on Form 1-NR/PY, Line 5.
- Subtract those wages on Schedule Y, Line 4.
You do not qualify for the Earned Income Tax Credit (EITC) since your spouse's compensation is not considered income for services performed in or from sources in Massachusetts.
Business expense deductions for National Guard and Reserve members
If you're a National Guard or Reserve member who has to travel more than 100 miles from home to perform services as a National Guard or Reserve member, you're allowed a deduction for:
- Unreimbursed overnight travel
- Lodging expenses
To claim the deduction on your tax return
- Report it as an adjustment on your U.S. Form 1040 and enter it on MA Form 1 (or 1-NR/PY)
- Fill in the appropriate oval.