Moving to Massachusetts

Massachusetts taxes residents on everything and nonresidents on Massachusetts-source income, and it decides who is a resident two ways. You are a resident if your domicile, your true and permanent home, is in Massachusetts. You are also a resident, even with a domicile somewhere else, if you keep a permanent place of abode in Massachusetts and spend more than 183 days of the year in the state, counting any day you are here for any part of it. A person who moves in or out during the year is a part-year resident and files Form 1-NR/PY, reporting everything received while a resident plus any Massachusetts-source income from the rest of the year, with the exemptions prorated by days. A nonresident files the same form for Massachusetts-source income alone, which for an employee means wages for days actually worked in Massachusetts. There is no reciprocity agreement with any state, so a commuter from across the border pays Massachusetts on Massachusetts days and takes a credit at home if home has an income tax. A Massachusetts resident who works in another state does the reverse on Schedule OJC.

The year you move is the year the Department of Revenue looks hardest, and what it looks at is not the moving van but the ties: where you vote, where your car is registered, where your doctor and your club and your safe deposit box are, and how many days you spent in each place. The burden of proving a change of domicile falls on the person claiming it.

Domicile

Domicile is your legal residence: the one place that is your true home, the place you intend to return to when you are away. You can own several homes, but you can have only one domicile, and you keep it until you establish a new one. Changing it requires three things at once: abandoning the old domicile, taking up residence in the new place, and intending to stay there permanently or indefinitely with no present intention of returning. Temporary absences, however long, do not change it. A year abroad on assignment, a winter in a warm state, a stint caring for a parent elsewhere: none of these moves a Massachusetts domicile out of Massachusetts unless the intent to come back is gone.

The Department weighs all the facts, and its own list is the checklist for anyone leaving: a home bought or leased in the new state and the old one sold or its lease ended; the furniture moved; permanent employment there; voter registration, driver’s license and vehicle registration changed; bank accounts moved; church and club memberships moved; address changes filed everywhere; where the children go to school. The Department may ask for five years of addresses, the months spent in each state, every property owned, dates of physical presence, voting history, safe deposit box locations, the address on your passport and the IRS office you filed with. Declarations of intent are, in the Department’s words, examined closely; a declaration of domicile elsewhere with a Massachusetts life behind it does not hold.

The 183-day test

The second route to residency catches people who never meant to be residents. If you maintain a permanent place of abode in Massachusetts and spend more than 183 days in the state during the year, you are a full-year resident and file Form 1, with all your income taxable, regardless of domicile. Any part of a day counts as a day, so a drive through the state or a flight out of Logan after a morning at home is a Massachusetts day. Days on active duty in the armed forces do not count.

A permanent place of abode is a dwelling you continually maintain, owned or rented, including a place your spouse owns or leases. It does not include a dorm room, barracks, hospital room, a dwelling without a kitchen or bath or one not fit for winter, a hotel room in most cases, a house leased to unrelated tenants for a year or more that you have no right to occupy, or a place kept for a documented temporary purpose of under a year. The person most often caught is the one who retired elsewhere, kept the family house, and spends June through October plus holidays here: with the house, the day count is all that matters, and 184 days makes a resident. Keep a calendar; in a dispute the Department will ask for one, with the credit card and phone records behind it.

The part-year return

The year you move in or out, you file Form 1-NR/PY as a part-year resident. The residency period starts the day you become domiciled here, or the day you give up Massachusetts domicile, and the form asks for the dates. During the residency period you report income from every source, wherever earned, the same as a full-year resident. For the nonresident part of the year you report only Massachusetts-source income, if any, on Schedule R/NR, which splits the two periods. Social Security and exempt government pensions stay off in both periods.

The exemptions are prorated by days: the personal exemption, the $1,000 per dependent and the $700 for age 65 are multiplied by the days you were a resident over 365. Someone who became a resident on July 1 claims 184/365 of the $4,400 single exemption, $2,218. The deductions follow the same ratio, with the rent deduction available for rent paid on a Massachusetts principal residence in either period. The refundable credits prorate too: the 40% earned income credit and the $440 Child and Family Tax Credit are multiplied by the same fraction, and the Senior Circuit Breaker is not available to nonresidents. Income is assigned to the period in which it was received: a pension check dated June 30 belongs to the old state, one dated July 31 to Massachusetts. A bonus paid in March for last year’s work goes with your residency on the day it was paid.

The part-year resident takes the Schedule OJC credit for tax paid to another state on income earned during the Massachusetts residency period and taxed by both, but not for the other state’s tax on income from the nonresident period, which Massachusetts did not tax in the first place. Filing threshold: a part-year resident files when Massachusetts gross income for the year is more than $8,000.

Nonresidents and the working-days rule

A nonresident owes Massachusetts tax on income from Massachusetts sources: wages for work performed in Massachusetts, income from a trade or business carried on here, rent and gains from Massachusetts real estate, and Massachusetts lottery and wagering winnings. Not Massachusetts source, and so not taxed: interest, dividends and gains from stocks and other intangibles, unless tied to a Massachusetts business, and pension and IRA income, which federal law bars any state from taxing once you no longer live there. A nonresident must file when Massachusetts-source income is more than the lesser of $8,000 or the personal exemption prorated by the share of total income that is Massachusetts-source.

For an employee who works some days in Massachusetts and some days elsewhere, the Massachusetts wage is the total wage multiplied by the number of days worked in Massachusetts over total working days. Weekends, holidays, sick days, vacation and leave are left out of both numbers. The pandemic-era rule that treated a nonresident’s remote days as Massachusetts days ended in September 2021, and Massachusetts has no “convenience of the employer” rule that would tax a home-office day because the employer is here. The nonresident’s exemptions and deductions are prorated, not by days but by income: Massachusetts-source gross income over gross income from all sources, as if the person were a full-year resident.

Massachusetts has no reciprocity agreement with any state. A resident of a neighboring state who works in Boston pays Massachusetts tax on the Massachusetts days and, if the home state has an income tax, claims a credit there. A resident of a state with no income tax who commutes in pays Massachusetts and gets no credit anywhere, because there is nothing to credit against. Employers withhold Massachusetts tax on Massachusetts wages for nonresidents; a commuter who works from home part of the week should tell the employer the split or expect to recover the difference on Form 1-NR/PY.

Residents working elsewhere: Schedule OJC

A Massachusetts resident reports all income, and when another state taxes some of it too, Form 1 line 30 allows a credit for the tax due to the other jurisdiction, computed on Schedule OJC. The credit is the smaller of the other state’s tax on that income or the Massachusetts tax on the same income, so it never reduces Massachusetts tax below zero on that income and never refunds the difference when the other state’s rate is higher. The qualifying jurisdictions are other states, the District of Columbia, Puerto Rico and the other U.S. territories, and Canada and its provinces; the credit does not cover city or local income taxes, foreign countries other than Canada, or property, excise or gross-receipts taxes. Use the tax due on the other return, not the amount withheld. Income taxed at different Massachusetts rates, wages at 5% and a short-term gain at 8.5%, is figured separately. Owners of pass-through entities that paid another state’s entity-level tax may claim their share with a statement from the entity, and residents subject to the 4% surtax use the Department’s online OJC worksheets. If the other state is one with no income tax, there is no credit and the Massachusetts 5% applies in full.

Working from a Massachusetts home for an out-of-state employer is Massachusetts income only, unless the other state has a convenience rule of its own that reaches back; then the OJC credit covers the overlap.

Retirement income and the move

Pension and IRA distributions are taxed by the state you live in when you receive them, by federal law. A retiree who moves in brings a private pension taxed here at 5% from the date of the move, and a government pension that is not, if it came from the U.S., from Massachusetts, or from a state that reciprocates. A resident who retires elsewhere stops owing Massachusetts tax on the pension the day residency ends, which is why the Department scrutinizes retirement-year moves and why the 183-day count matters to someone who kept the house. A Roth conversion done while a resident is Massachusetts income; one done after a genuine move is not. See Massachusetts for retirees.

Selling the house

Massachusetts adopts the federal home-sale exclusion, so gain of up to $250,000, or $500,000 on a joint return, on a principal residence is not Massachusetts income. Gain above the exclusion is a long-term capital gain at 5%, and in a year when it combines with a final salary and a pension it can cross the $1,107,750 surtax line. A nonresident who sells Massachusetts real estate owes Massachusetts tax on the gain above the exclusion; it is Massachusetts-source income regardless of where the seller lives. The federal rules are in The home sale exclusion.

The year you move: a checklist

• Write down the date your domicile changed, and keep a day count for the whole year, especially if you still have a home in Massachusetts.
• Change the license, the registration, the voter registration, the will and the address on every account in the first month, in the new state.
• Tell your employer the date and, if you commute across the line, the split of working days; ask for withholding to match.
• Tell pension payers and IRA custodians the date, so the 1099-R and the withholding follow you.
• Keep pay stubs, pension statements and brokerage statements by month, so income can be assigned to the right period.
• If you leave Massachusetts and keep the house, lease it for a year or more to unrelated tenants or be prepared to count days.
• File Form 1-NR/PY, with Schedule R/NR if you had Massachusetts-source income in the nonresident period, and the other state’s part-year return.
• Claim the Schedule OJC credit on income taxed twice during the Massachusetts residency period.