Massachusetts Taxes Definitions in the United States

For more information about taxes in Massachusetts, see Tax Law in the Massachusetts Portal.

Massachusetts Excise Tax Definition

Massachusetts Tax Resident Definition

The Massachusetts Department of Revenue (DOR or MADOR) is changing the Massachusetts Tax Resident Definition frequently.

In general, a person is considered resident (residence does not equal to tax residence) in the state if he or she receives a local property tax exemption, files a state resident income tax return or receives a rental deduction, registers to vote in Massachusetts, enroll his / her children in a local public school or pays resident tuition for them at a state college or university, receives public assistance from the state of Massachusetts, declare that mortgaged or insured property located in the state is his or her principal residence, or obtains any employment, benefit or privilege by claiming residency in the state.

Massachusetts Tax Residency

According to DiCicco, Gulman & Company LLP (http://www.dgccpa.com/article/check-your-status-are-you-a-massachusetts-resident/), for state income tax purposes in Massachusetts, “the determination of an individual’s status as a resident or non-resident is essential for determining your tax liability in Massachusetts. This is important because a resident’s entire income would be subject to tax, whereas a non-resident is taxed only on income derived from or connected to sources within Massachusetts. For example, interest and dividends are taxed in your resident state, but rental real estate is taxed in both the state where the real estate is actually located and your resident state.

Your resident state is determined based on domicile or time spent in the state, not necessarily where your physical home is located. For example, you may have a home in Florida and a home in Massachusetts, but you can only have one domicile. The MADOR defines a resident as a person who is either “domiciled” in Massachusetts or, even if not domiciled, who maintains a permanent place of abode and spends more than 183 days in the state during the tax year. A taxpayer’s domicile is “the place which is an individual’s true, fixed and permanent home, determined by established common law principles and the facts and circumstances in each case.”

The domicile determination is subjective and based on facts and circumstances, as a result it is often challenged by the MADOR and frequently litigated. The MADOR will look at each particular case to determine if the taxpayer at issue is domiciled within or outside of Massachusetts for tax purposes”.

Other Massachusetts Tax Definitions

Massachusetts Department of Revenue (DOR) Directives (DDs)

concern current Department policy, practice or interpretation, and provide details or supplementary information, clarify ambiguities, resolve inconsistencies or explain and elaborate on issues. A directive states the official policy of the Massachusetts Department of Revenue, will be used as precedent unless or until revoked or modified, and may be relied on by taxpayers in situations where the facts, circumstances and issues presented are substantially similar to those set forth in the Directives.

Massachusetts adjusted gross income

It is the Massachusetts gross income less certain allowable federal deductions under the Inland Revenue Code Sections 62 and 404 such as alimony paid, moving expenses, student loan interest paid, etc. No Tax Status and the Limited Income Credit are based on Massachusetts adjusted gross income, as well as the College Tuition deduction.

Massachusetts General Laws (M.G.L.)

Massachusetts Department of Revenue administers and enforces tax statutes in the Commonwealth under the Massachusetts General Laws. In addition, Massachusetts Department of Revenue’s Rulings and Regulations Bureau issues documents that explain Massachusetts tax laws and related court decisions, clarify the Department’s position on a variety of tax issues, and detail certain Departmental procedures.

Massachusetts gross income

It is similar to the federal gross income, with certain modifications. Certain items are added/deducted to federal gross income to arrive at Massachusetts gross income. Filing requirements are based on the state gross income. Massachusetts gross income includes income from all sources, both in and out of Massachusetts. Massachusetts gross income is divided into three parts:

Massachusetts Form 1, Line 10 or 1-NR/PY, Line 12 income (Part B income) is Massachusetts gross income not included in Schedule B or D which includes wages, salaries, pensions, business income, rental income, alimony and winnings, etc.;
Massachusetts Schedule B (Part A income) is total interest, dividends and certain capital gains;
Massachusetts Schedule D (Part C income) is long-term capital gain income.

More practical information about the legal definition:

Massachusetts gross income for a nonresident = Massachusetts source income, e.g. income derived from sources within Massachusetts.
Massachusetts gross income from all sources for a nonresident is Massachusetts gross income plus non-Massachusetts source income, or income that would be included if a taxpayer were a full year Massachusetts resident.

Massachusetts holding period of capital assets sold or exchanged

For purposes of determining the length of time a capital asset is held, the state holding period is generally the same as the holding period determined for federal tax purposes. However, for state purposes, a capital asset acquired before January 1, 1996, is deemed to have been acquired on the later of (i) January 1, 1995 or (ii) the date of actual acquisition:

capital gain or loss is long-term if the property was held for more than one year. Long-term capital gains, except gains on collectibles and pre-1996 installment sales, are taxed at 5.3% on Schedule D. Gains from collectibles and pre-1996 installment sales are taxed at the 12% rate on Schedule B.
capital gain or loss is short-term if the property was held for one year or less. Short-term gains and gains from collectibles are taxed at 12% on Massachusetts Schedule B.

Massachusetts Optional Retirement Program (ORP)

It is a defined contribution retirement plan for certain employees of the Commonwealth’s institutions of public higher education established by G.L. c. 15A, section 40. The Department of Higher Education is the Plan Administrator.

Massachusetts previously taxed contributions

They are contributions for which a Massachusetts deduction was not allowed at the time an individual contributed to certain retirement savings accounts such as an IRA account.

Massachusetts source income

It is income taxable to a nonresident. It includes items of gross income derived from or effectively connected with:

any trade of business, including any employment carried on by the taxpayer in Massachusetts;
the participation in any lottery or wagering transaction in Massachusetts; or
the ownership of any interest in real or tangible personal property located in Massachusetts.

Massachusetts Taxable Income

It is Massachusetts adjusted gross income less specific Massachusetts deductions found on Form 1, lines 11 – 14 (Form 1-NR/PY, Lines 15 – 18) and Schedule Y, Lines 11 – 16 as well as the deduction for exemptions. Taxable income is the figure used to determine actual tax due.

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