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Learn about the income tax paid to another jurisdiction credit

If you owe taxes to other jurisdictions, you might qualify for this credit.

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
  • Any territory or dependency of the U.S., including:  
    • Puerto Rico
    • The Virgin Islands
    • Guam
    • 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 for 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 credit is the smaller of:

    • Massachusetts income tax on income you reported to the other jurisdiction, or
    • The actual tax you paid to the other 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

    Pass-through entities

    Massachusetts resident taxpayers who are:

    • Sole proprietors
    • Shareholders
    • Partners, or
    • Members

    Of pass-through entities are entitled to this credit for taxes they paid to other jurisdictions.

    S corporations and their shareholders

    If you're a Massachusetts shareholder of an S corporation, you can claim 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:

    1. The tax is required by another state, territory, or possession of the United States, or Canada or its provinces
    2. 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 does not qualify.
    3. The S corporation does not deduct any part of the tax from its income when calculating net income available for distribution to shareholders
    4. 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.

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    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

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    Rhode Island Temporary Disability Insurance Act payments

    For the purposes of this credit, mandatory contributions 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) 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

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    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 correctly calculated credit
    • 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.

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