Massachusetts income tax

Overview: In Massachusetts, the filing requirement limits of income tax are established by the Massachusetts law for all categories of taxpayers, namely residents, nonresidents and part-year residents. At times it may be necessary for an individual to file a return even if he/she doesn't have any tax liability due to the commonwealth. The total gross income-which includes that acquired from a Massachusetts source or from outside-from all sources is the basis on which the tax of a particular individual is determined.

Massachusetts tax rates: In Massachusetts, two rates of taxes are imposed, a rate of 5 .3% which is applicable to wages, interest and dividends and long-term capital gains, and a 12% rate which is imposed on short term capital gains, both long and short term capital gains on collectibles and sales done on installment basis before 1996 which are classified as capital gain income .

Income including long term capital gains excepting collectibles and installment sales undertaken before 1996 is imposed a tax at the rate of 5.3%.

Taxpayers also have a choice to remit a higher rate of tax of 5.87% on certain types of income. These are Form 1 or 1-NR/PY income after exemptions, Schedule B interest and dividend income and schedule D net long term capital gains. It may be noted that the choice of paying the higher rate of tax is not applicable to those items taxed at 12%.

Filing requirements for various categories:

Full year residents : All full year residents whose gross income form Massachusetts is more than $8,000 during a taxable year should file a return even if they have no tax due to pay. Form 1- Massachusetts Individual Income Tax Return is to be used by them .

To be considered as a full year resident, you should have resided legally in Massachusetts or have spent more than 183 days of the taxable year in Massachusetts in total including those days spent partly in Massachusetts, maintaining a permanent address there .

Part-year residents: All part-year residents who acquire an amount greater than $8,000 as gross income from Massachusetts, should file a Massachusetts return even in the case of a zero tax . Massachusetts Form 1 NR/PY- Nonresident/Part-year resident Individual Income Tax return, is filed by a nonresident. The gross income of a Massachusetts part-year resident is the income earned by him/her while he/she resided in Massachusetts.

A part year resident is an individual who has moved to Massachusetts to become a resident, during the taxable year, or who terminated his/her MassachusettsState> resident status during the taxable year in order to set up a residence outside the state .

If you were a resident of MassachusettsState> for a portion of the year and a non resident with income from a :State>Massachusetts source for the remaining part of the year, you should file Form 1-NR/PY and calculate the income earned as a part-year resident and as a nonresident by completing Schedule R/NR.

Nonresidents: All non-residents whose gross income from :Massachusetts sources is more than $8,000 or greater than their entitled personal exemption (whichever is less), must file a Massachusetts return. The personal exemption is calculated by dividing the product of Massachusetts gross income by the entire gross income earned from all sources and the allowed personal exemption for their individual filing status . Nonresidents are to file Massachusetts Form 1 NR/PY-Non-resident/Part-Year Resident Individual Income Tax return. The gross income for a Massachusetts non-resident is the income earned from Massachusetts sources.

Military personnel: Individuals who are engaged in military service as :Massachusetts residents and who haven't set up residence legally anywhere else, will be considered as Massachusetts residents and if his/her gross income exceeds $8,000, then he/she must file a return as a :Massachusetts resident. A nonresident serving the military may be require to disclose income earned outside military sources in Massachusetts.

Native Americans: It has been declared by the Indian affairs commission in Massachusetts that the only native American tribe in Massachusetts which is recognized by the federal government is the Gayhead Wampanaog, whose reservation is located on Martha's Vineyard, which is thus the only "Indian country in Massachusetts. Native Americans who live in an Indian country are not subjected to tax because they are not considered as Massachusetts citizens.

Students: Students who attend school or college in Massachusetts who haven't set up a legal residence there, are required to file as residents if they have a permanent place of abode and stayed a total of 183 days or more in Massachusetts during the tax year.

Students who are admitted to U.S as nonresident aliens are not permitted normally to work in return of salary or wages, or to do business while they live in the country.

Options to file a Massachusetts return: there are a number of options available for taxpayers in Massachusetts to file a return. E-filing is the widely used method as it is the quickest and the most accurate of the methods. For this, the department of revenues (DOR) Telefile program or a program approved by DOR can be used, thru which the taxpayers can e-file their returns with the help of a professional tax preparer .

Another method available for the taxpayer other than the conventional paper returns is the 2-D barcode method by which the income tax returns could be prepared and filed using approved software products supporting 2-D barcodes, where all the relevant information entered by the taxpayer will be contained in the barcodes thus making the processing of returns much faster and accurate .

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