As a Massachusetts resident or part-year resident, you're allowed a credit for taxes due to any other 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.
- Any territory or dependency of the U.S., including:
- Puerto Rico
- The Virgin Islands
- The District of Columbia
- Canada or any of its provinces
- 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 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 Schedule Z, Line 9 Worksheet - Income Tax Paid to Another Jurisdiction
- Part-year residents - Complete Schedule F - Credit for Income Taxes Paid to Other Jurisdictions
Massachusetts resident taxpayers who are:
- Sole proprietors
- Partners, or
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:
- 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 does not qualify.
- 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.
Additional Resources for Pass-through entities
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
Additional Resources for Gross receipts-based taxes
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
Additional Resources for Rhode Island Temporary Disability Insurance Act payments
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 Schedule Z, Part 2, Line11 Worksheet Income Tax Paid to Another Jurisdiction, 2014 Form 1 Instructions (Pages 21-22). If you qualify, enter the amount from Line 9 of the worksheet on MA Form 1, Schedule Z, Part 2, Line 10. Enter the 2-letter state or jurisdiction postal code(s).
- Part-year residents - Calculate the credit on the Schedule Z, Part 2, Line11 Worksheet Income Tax Paid to Another Jurisdiction, 2014 Form 1-NR/PY Instructions (Page 26). If you qualify, enter the amount from Line 9 of the worksheet on MA Form 1-NR/PY, Schedule Z, Part 2, Line 10. Enter the 2-letter state or jurisdiction postal code(s).
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, Schedule Z - Line 12 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.