How Do I Claim the Massachusetts Credit for Taxes Paid to Another State?

If you're a Massachusetts resident and paid income tax to another state on the same income, you may qualify for the Massachusetts Credit for Taxes Paid to Another State.

In most cases, the credit is calculated automatically when you add the other state's nonresident return to your already-created Massachusetts resident return and complete both returns correctly.

How the Credit Works

Massachusetts allows a credit for income taxes that are:

• Paid to another U.S. state
• Paid to a U.S. territory or dependency (such as Puerto Rico, Guam, the U.S. Virgin Islands, or the District of Columbia)
• Paid to Canada or a Canadian province (subject to certain limitations)

The credit generally applies when the same income is taxed by both Massachusetts and another qualifying jurisdiction.

Important: Tax Due Is Not the Same as Tax Withheld

The credit is based on the actual tax liability owed to the other jurisdiction, not the amount withheld from your wages or other income.

For example:

• If another state withheld $2,000 from your paycheck but your actual tax due was $1,200, Massachusetts uses the $1,200 tax liability, not the $2,000 withholding amount.

What Taxes Do Not Qualify?

You cannot claim this credit for:

• Taxes paid to the U.S. federal government
• Taxes paid to a foreign country other than Canada or a Canadian province
• City or local income taxes
• Interest and penalty charges
• Excise taxes
• Property taxes
• Franchise taxes

Additional Limitations

The credit is generally limited to the smaller of:

• The tax actually due to the other jurisdiction, or
• The portion of Massachusetts tax attributable to the income taxed by both jurisdictions

Because of this limitation, the full amount paid to the other state may not always be allowed as a credit.

How Do I Claim the Credit in the Program?

The credit is typically generated automatically when:

1. Complete your Massachusetts resident return
2. Add and complete the applicable nonresident state return
3. Ensure the same income is reported on both returns

The software will use the information from both returns to calculate the credit automatically.

Important Notes

• The credit only applies to qualifying income taxes paid to another jurisdiction.
• The credit is based on tax due, not on tax withholding.
• Be sure to complete both returns before reviewing the credit calculation.
• Massachusetts may generate Schedule OJC (Income Tax Due to Other Jurisdictions) if additional information is required.
• Income taxed by both Massachusetts and another state is the most common reason taxpayers qualify for this credit.