Massachusetts — Personal Income Tax

Massachusetts imposes personal income tax on individuals based on residency status. Understanding whether you are a resident, part-year resident, or nonresident determines both what income is taxable and whether you must file a return.

## Who Is a Resident

A resident (or "inhabitant") of Massachusetts is any natural person who either (1) is domiciled in the commonwealth, or (2) is not domiciled in Massachusetts but maintains a permanent place of abode in the commonwealth and spends in the aggregate more than 183 days of the taxable year in Massachusetts. Source: M.G.L. c. 62, § 1(f)

Residents are taxed on all income, regardless of source. Source: Personal Income Tax for Residents | Mass.gov

## Who Is a Part-Year Resident

A part-year resident is any person who either moves to Massachusetts and becomes a resident during the taxable year or terminates Massachusetts residency during the taxable year. Source: 830 CMR 62.5A.1

Part-year residents are taxed on all income earned during the period of residency, plus income from Massachusetts sources during the nonresident portion of the year. Source: Personal Income Tax for Part-Year Residents | Mass.gov

## Who Is a Nonresident

A nonresident is any natural person who is neither a full-year resident nor a part-year resident. Source: 830 CMR 62.5A.1

Nonresidents are taxed only on Massachusetts source income, which includes income from (1) any trade or business, including employment, carried on in Massachusetts; (2) participation in any lottery or wagering transaction in Massachusetts; or (3) ownership of any interest in real or tangible personal property located in Massachusetts. Source: 830 CMR 62.5A.1

## Filing Thresholds

Residents: Every resident whose Massachusetts gross income is $8,000 or more must file a Massachusetts personal income tax return (Form 1). Source: M.G.L. c. 62C, § 6

Part-year residents: Any part-year resident with annual Massachusetts gross income of more than $8,000 must file a Massachusetts tax return (Form 1-NR/PY). Source: Who Must File a Massachusetts Personal Income Tax Return | Mass.gov

Nonresidents: A nonresident must file if Massachusetts gross income exceeds $8,000 or the prorated personal exemption, whichever is less. Nonresidents file Form 1-NR/PY. Source: Who Must File a Massachusetts Personal Income Tax Return | Mass.gov

## Due Date

Massachusetts personal income tax returns are due on or before April 15 following the close of the taxable year. If April 15 falls on a weekend or legal holiday, the due date is the next business day. Source: Personal Income Tax for Residents | Mass.gov

Massachusetts imposes a flat 5.0% tax on Part B income, which includes wages, salaries, business income, and most other income (including long-term capital gains). Short-term capital gains—gains from the sale of assets held one year or less—are taxed at 8.5% as Part A income. Long-term capital gains on collectibles are taxed at 12.0%.

## 4% Surtax on High Earners

Effective for tax years beginning on or after January 1, 2023, Massachusetts imposes an additional 4% surtax on taxable income exceeding an annually adjusted threshold. The surtax applies to the total of a taxpayer's Part A, Part B, and Part C taxable income for the year (treating any negative Part as zero). The threshold is adjusted annually for inflation by the Department of Revenue pursuant to M.G.L. c. 62, § 4(d).

The inflation-adjusted surtax thresholds by tax year are:

• Tax year 2023: $1,000,000
• Tax year 2024: $1,053,750
• Tax year 2025: $1,083,150 (returns filed in 2026)
• Tax year 2026: $1,107,750 (returns filed in 2027)

A taxpayer whose total taxable income exceeds the threshold for the applicable tax year pays the ordinary rate (5.0%, 8.5%, or 12.0%, depending on income type) on all income, plus an additional 4% on the amount above the threshold. For example, a taxpayer with $1,200,000 of Part B wages in tax year 2026 pays 5% on the entire $1,200,000, plus 4% on the $92,250 excess above the $1,107,750 threshold, for a combined effective rate of 9% on the amount above the threshold.

The Department of Revenue certifies the inflation-adjusted threshold annually and publishes it on Form 1-ES (Estimated Tax Payment Vouchers) for the applicable tax year. Taxpayers filing 2025 tax returns in 2026 use the $1,083,150 threshold; those making 2026 estimated tax payments or filing 2026 returns in 2027 use the $1,107,750 threshold. The current and historical thresholds are published on the Mass.gov surtax information page.

Source: M.G.L. c. 62, § 4; Massachusetts 4% Surtax on Taxable Income | Mass.gov; 2026 Form 1-ES | Mass.gov; 2025 Form 1 Instructions | Mass.gov

Massachusetts allows personal exemptions that reduce taxable income. The amounts vary by filing status: $4,400 for single filers, $6,800 for head-of-household filers, and $8,800 for married couples filing jointly. Additional exemptions are available: $2,200 if the taxpayer or spouse is legally blind at year-end, $700 if the taxpayer reached age 65 before year-end (also available for a qualifying spouse), and $1,000 per qualifying dependent.

Source: M.G.L. c. 62, § 3

Massachusetts does not allow the federal standard deduction. Instead, taxpayers reduce taxable income through personal exemptions (set amounts based on filing status, dependents, age, and disability) and specific itemized deductions enumerated in M.G.L. c. 62, § 3. The principal deductions available include rent paid, college tuition exceeding 25% of Massachusetts adjusted gross income, and certain commuter expenses. Unlike federal law, Massachusetts does not permit a broad medical expense deduction or net operating loss carryforward.

## Rent Deduction — 50% of Rent, Capped at $4,000

An individual who pays rent for a principal place of residence located in Massachusetts is entitled to deduct an amount equal to 50% of such rent from Part B adjusted gross income. For tax years beginning on or after January 1, 2023, the maximum deduction is $4,000 for a single person, for a person who qualifies as head of household, or for a married couple filing jointly. For married persons filing separate returns, the maximum deduction is $2,000 per return (though couples may allocate the deduction differently if both spouses consent, provided the combined deduction does not exceed $4,000).

This $4,000 cap was enacted by St. 2023, c. 50, which amended M.G.L. c. 62, § 3(B)(a)(9), effective for tax years beginning on or after January 1, 2023. Prior to the 2023 amendment, the maximum deduction was $3,000 ($1,500 for married filing separately), a cap that had been in effect since tax year 2001.

The updated regulation 830 CMR 62.3.1(1)(a) (working draft, amended October 4, 2023) confirms the $4,000 cap and cites the statutory amendment. The pre-2023 version of the regulation (last amended December 16, 2016) reflected the prior $3,000 cap.

Source: M.G.L. c. 62, § 3(B)(a)(9); 830 CMR 62.3.1: Rent Deduction (Working Draft); 2023 Massachusetts Tax Cuts Legislation | Mass.gov

## Other Deductions

Additional deductions from Part B adjusted gross income include:

• Commuter expenses: Amounts expended for tolls paid through a Fast Lane account, for MBTA or regional transit authority fares, for bikeshare memberships, or for bicycles (including electric bicycles) and bicycle improvements, repair, and storage, not including amounts reimbursed by an employer. For single filers or married persons filing separately or heads of household, the deduction applies only to the portion exceeding $150, with a total deduction capped at $750. For married couples filing jointly, the total deduction cap is $1,500, with the $150 floor applied per individual.

• College tuition: An amount equal to the amount by which tuition payments by the taxpayer to a two- or four-year college in which the taxpayer or a dependent is enrolled (less any scholarships, grants, or financial aid received) exceeds 25% of the taxpayer's Massachusetts adjusted gross income, exclusive of this deduction. The deduction is subject to statutory limitations.

• Charitable contributions: An amount equal to the charitable contribution deduction allowed or allowable under IRC § 170, subject to the condition that the prior taxable year's Part B tax rate was 5%. Taxpayers are not required to itemize deductions on their federal return to claim this deduction. Contributions of household goods or used clothing are not deductible. (This deduction became available for tax years beginning on or after January 1, 2023, pursuant to a condition in statute that was met.)

• Student loan payment assistance from employer: For tax years beginning on or after January 1, 2023, an amount equal to the amount of student loan payment assistance received by an individual from an employer during the taxable year, to the extent not already excluded under IRC § 127.

Massachusetts does not allow deductions for medical expenses (except within very narrow circumstances), state and local taxes, mortgage interest, or most other federal itemized deductions.

Source: M.G.L. c. 62, § 3(B)(a); Differences Between MA and Federal Tax Law | Mass.gov

Massachusetts requires quarterly estimated tax payments from taxpayers who expect to receive income not subject to withholding. Understanding the thresholds, payment schedule, safe harbors, and penalties is essential for compliance.

## Who Must Pay Estimated Tax

Every taxpayer who can reasonably expect to receive income taxable under M.G.L. c. 62 from sources other than wages subject to withholding and for whom the amount of estimated tax exceeds $400 must make quarterly estimated tax payments. This requirement applies to residents, part-year residents, nonresidents, and fiduciaries.

Common types of income requiring estimated payments include self-employment income, partnership and S corporation distributions, rental income, capital gains, dividends and interest, certain pension and retirement plan distributions, unemployment compensation (if withholding was not elected), and lottery or gambling winnings.

Source: M.G.L. c. 62B, § 13; AP 241: Estimated Income Tax Payments

## Payment Schedule and Installment Amounts

For calendar-year taxpayers, estimated tax is payable in four equal installments of 25% of the required annual payment, due on or before:

• First installment: April 15
• Second installment: June 15
• Third installment: September 15
• Fourth installment: January 15 of the following year

If any due date falls on a weekend or legal holiday, the payment is due on the next business day. Taxpayers may pay the full estimated tax with the first installment or spread payments across the four due dates. The required annual payment is the amount necessary to meet the 80% safe harbor described below (or 66.67% for farmers and fishermen).

Taxpayers subject to the 4% surtax on income exceeding $1 million must include the surtax when calculating required estimated payments and are required to file and pay all taxes electronically.

Source: AP 241: Estimated Income Tax Payments; Massachusetts DOR Personal Income and Fiduciary Estimated Tax Payments

## Safe Harbors and Required Annual Payment

Massachusetts taxpayers are generally required to pay at least 80% of their annual income tax liability through withholding and estimated tax payments combined to avoid underpayment penalties. Farmers and fishermen—taxpayers whose gross income from farming or fishing is at least two-thirds of their annual gross income—need only pay 66.67% of their annual tax liability.

A taxpayer avoids penalties if total payments equal or exceed the lesser of:

1. 80% of the current year's tax (the amount shown on the current year's return when filed), or
2. 100% of the prior year's tax (the total tax shown on the Massachusetts return for the preceding taxable year, provided the taxpayer filed a return for a full 12-month period).

The prior-year safe harbor is available only if the taxpayer filed a Massachusetts return covering a full 12 months in the preceding year. New Massachusetts residents and first-time filers cannot use the prior-year safe harbor and must rely on the 80% current-year test.

Source: AP 241: Estimated Income Tax Payments

## Underpayment Penalty

Taxpayers who fail to pay at least 80% of their annual tax liability (or 66.67% for farmers and fishermen) through withholding and estimated payments are subject to an addition to tax for underpayment. The penalty is calculated at the federal short-term rate plus four percentage points per year, compounded daily, on the amount of the underpayment for the period of underpayment. The underpayment period runs from the installment due date to the earlier of the payment date or the return due date.

No penalty is imposed if the tax due after withholding and credits is $400 or less.

Taxpayers calculate the penalty using Form M-2210 (Underpayment of Massachusetts Estimated Income Tax), which must be completed and attached to the annual return if the 80% threshold was not met.

Source: M.G.L. c. 62B, § 14; AP 241: Estimated Income Tax Payments; Massachusetts DOR Personal Income and Fiduciary Estimated Tax Payments

Massachusetts taxes nonresidents only on income from sources within the Commonwealth. Understanding what constitutes Massachusetts-source income is essential for nonresident compliance and for employers withholding on behalf of nonresident employees.

## General Rule — Income from Trade or Business in Massachusetts

Under M.G.L. c. 62, § 5A(a), Massachusetts-source income includes items of gross income derived from or effectively connected with (1) any trade or business, including any employment, carried on by the taxpayer in Massachusetts, (2) participation in any lottery or wagering transaction in Massachusetts, or (3) ownership of any interest in real or tangible personal property located in Massachusetts. The trade-or-business category is the broadest and most frequently applied.

All items of income that derive from the conduct of a trade or business or employment in Massachusetts are Massachusetts-source income, even if the taxpayer has not been present in Massachusetts during the year in which the income is received. This rule applies regardless of the taxpayer's current residence or domicile. Income earned from or attributable to a Massachusetts trade or business in any year remains Massachusetts-source income when received, regardless of when payment occurs or where the taxpayer lives at the time of receipt.

Source: M.G.L. c. 62, § 5A; 830 CMR 62.5A.1(3)

## Employment Income — Physical Location Where Services Are Performed

For compensation for personal services (wages, salaries, bonuses, commissions), Massachusetts sources the income based on where the services are physically performed. Massachusetts does not apply a "convenience of the employer" rule. A nonresident employee who performs services entirely outside Massachusetts—including telecommuting from another state for a Massachusetts-based employer—does not have Massachusetts-source income from those services, provided the work is actually performed outside the Commonwealth.

During the COVID-19 pandemic, Massachusetts temporarily adopted an emergency regulation (830 CMR 62.5A.3) that treated wages of nonresidents who had worked in Massachusetts before March 10, 2020, and then telecommuted from outside the state due to pandemic-related circumstances, as continuing to be Massachusetts-source income. That regulation expired on September 13, 2021. Since that date, nonresident telecommuters are taxed based on the actual physical location where services are performed.

Source: 830 CMR 62.5A.1(3)(c)(1); Directive 21-1

## Apportionment for Multi-State Workers

When a nonresident employee earns income from sources both within Massachusetts and elsewhere, and no exact allocation is possible, the employee must apportion the income. For employees compensated on an hourly, daily, weekly, or monthly basis, the apportionment fraction is:

Massachusetts source income = Total compensation × (Days working in MA ÷ Total working days)

Only days on which the employee actually performs services count in the denominator; weekends, holidays, vacation days, and sick days are excluded unless the employee actually worked on those days. The numerator includes only days the employee was physically present and working in Massachusetts.

Example from the regulation: A telecommuter works for a Massachusetts firm, mainly from her home in Ohio. She works a total of 240 days during the tax year and is physically in Massachusetts on 60 of those days. Her salary is $120,000. Her Massachusetts-source income is $120,000 × (60 ÷ 240) = $30,000.

Source: 830 CMR 62.5A.1(5)(a)

## Specific Types of Massachusetts-Source Income

If a nonresident has a trade or business, including any employment, carried on in Massachusetts, Massachusetts-source income includes the following categories (among others):

• Compensation for personal services performed in Massachusetts, including wages, salaries, tips, bonuses, fees, and commissions.
• Distributive share income from a partnership or S corporation conducting business in Massachusetts (subject to apportionment if the entity has income from multiple states).
• Gain from the sale of an interest in a business or partnership that conducted business in Massachusetts. This includes gain from the sale of a partnership or LLC interest if the entity was engaged in a trade or business in Massachusetts, even if the seller is no longer actively involved at the time of sale. The regulation provides that such gains generally must be apportioned if the entity operated in multiple states.
• Deferred compensation, separation pay, sick or vacation pay, and nonqualified pension income not protected from state taxation by federal law, to the extent attributable to services performed in Massachusetts.
• Income from a covenant not to compete, to the extent connected with a Massachusetts trade or business.
• All types of investment income (dividends, interest, capital gains) derived from or effectively connected with the carrying on of a trade or business in Massachusetts. Investment income is Massachusetts-source income if it is attributable to the taxpayer's Massachusetts business operations.

Importantly, Massachusetts follows the "unitary business" principle for pass-through entities. Income from a pass-through entity that derives from or is effectively connected with the conduct of a trade or business in Massachusetts retains its character as it passes through tiered structures. If a nonresident is a member of a pass-through entity engaged in a unitary business that conducts a trade or business in Massachusetts, the nonresident's distributive share of Massachusetts-source income is taxable to the extent it would be taxable if received directly.

Source: 830 CMR 62.5A.1(3)(b), (c)

## What Is NOT Massachusetts-Source Income for Nonresidents

The regulation expressly excludes certain categories of income from Massachusetts-source income for nonresidents, even if the nonresident has other Massachusetts connections:

• Income from intangibles (stocks, bonds, notes) held for investment and not effectively connected with a Massachusetts trade or business.
• Portfolio income (dividends, interest, royalties, annuities) derived from a passive investment, unless the income is effectively connected with a Massachusetts trade or business.
• Gain from the sale of stock in a C corporation or S corporation, to the extent the gain is characterized as capital gain for federal purposes, unless the gain is otherwise connected with the taxpayer's conduct of a trade or business, including employment (for example, where the stock is related to the taxpayer's compensation for services). This exclusion has been the subject of significant litigation. In Welch v. Commissioner, the Massachusetts courts held that gain from founder's stock sold by a former employee could be Massachusetts-source income if the stock was effectively connected with the individual's employment.

Source: 830 CMR 62.5A.1(4)

## No Reciprocity Agreements

Massachusetts has no income tax reciprocity agreements with any other state. Nonresidents who work in Massachusetts must file a Massachusetts nonresident return (Form 1-NR/PY) and pay Massachusetts tax on their Massachusetts-source income. They may claim a credit for the Massachusetts tax paid on their home-state return if their home state allows such a credit.

Source: 830 CMR 62.5A.1(1)

Massachusetts does not permit net operating loss (NOL) carryforward or carryback for personal income tax purposes. Business losses that cannot be used in the current year to offset current-year income are permanently lost and may not be carried to any other tax year. This treatment differs sharply from federal law and from Massachusetts corporate excise tax law, both of which allow NOL carryforwards.

## Statutory Prohibition on NOL Carryforward and Carryback

M.G.L. c. 62, § 2(d)(1)(C) expressly disallows "any net operating loss deduction allowed by section one hundred and seventy-two of the Code" (Internal Revenue Code § 172). The statute makes no distinction between carryforward and carryback—neither is permitted. A taxpayer who incurs a net operating loss in one tax year may not apply that loss to reduce taxable income in a prior year (carryback) or in any future year (carryforward). The Massachusetts Department of Revenue has confirmed that "Massachusetts does not allow the federal treatment of carrying back or carrying forward any unused net operating loss."

Source: M.G.L. c. 62, § 2(d)(1)(C); Massachusetts Gross, Adjusted Gross, and Taxable Income | Mass.gov

## Current-Year Use of Business Losses — Part B Losses Offset Part B Income

A taxpayer may use a business loss incurred in the current year to offset other Part B income earned in that same year. Part B income includes wages, salaries, business income, partnership and S corporation distributive shares, and most other income (other than interest, dividends, short-term capital gains, and long-term capital gains). If a taxpayer has Part B business deductions that exceed Part B business income, the resulting loss offsets other Part B gross income in computing Part B adjusted gross income for that year.

Example (from Directive 86-28): A taxpayer operates two businesses. The plumbing business generates $5,000 of Part B net income. The painting business generates a $15,000 loss (business deductions exceed painting income by $15,000). The taxpayer combines the $5,000 income and the $15,000 loss and reports a net Part B business loss of $10,000 on Form 1 for the current year. That $10,000 loss may be used in the current year, subject to the rules described below, but may not be carried forward if unused.

Source: Directive 86-28: Excess Part B Adjusted Gross Income Deductions

## Excess Part B Deductions May Offset Certain Part A Income in the Same Year

If a taxpayer's Part B adjusted gross income deductions exceed Part B gross income, the excess may reduce Part A income only if two conditions are met:

1. The Part B deductions must be "adjusted gross income deductions" (deductions allowable under IRC § 62, such as trade or business expenses), and
2. The Part A income being offset must be "effectively connected with the active conduct of a trade or business of the taxpayer."

M.G.L. c. 62, § 2(c)(1) sets forth this rule. Part A income includes interest, dividends, and short-term capital gains. Only the portion of Part A income that is effectively connected with the taxpayer's active trade or business may be reduced by excess Part B business deductions. Part A income that is passive investment income (for example, dividend income from stock holdings unrelated to the taxpayer's business) cannot be offset by excess Part B business deductions.

In the example from Directive 86-28, the taxpayer's $10,000 net Part B business loss may offset a $5,000 Part A net capital gain from the sale of a plumbing business asset (because that gain is effectively connected with the plumbing business), but may not offset dividend income unrelated to either business.

Source: M.G.L. c. 62, § 2(c)(1); Directive 86-28

## Excess Part B Deductions May Offset Certain Part C Income in the Same Year

After applying excess Part B deductions against qualifying Part A income under § 2(c)(1), any remaining excess Part B deductions may reduce Part C net gains (long-term capital gains), but again only to the extent that the Part C income is "effectively connected with the active conduct of a trade or business of the taxpayer." M.G.L. c. 62, § 2(e)(2) governs this step. Excess Part B deductions may not be applied to increase the amount of any net capital losses and may not reduce the amount of any net capital gain below zero.

Source: M.G.L. c. 62, § 2(e)(2)

## Losses That Cannot Be Used in the Current Year Are Permanently Lost

If, after applying the rules above, a taxpayer still has unused excess Part B business deductions at the end of the tax year—because the taxpayer has no Part A or Part C income, or the only Part A or Part C income is passive investment income not connected with a trade or business—those unused deductions are permanently lost. They may not be carried back to reduce income in prior years, and they may not be carried forward to reduce income in future years. The Massachusetts FY26 budget document confirms: "Ordinary losses may not be carried forward."

This limitation can result in significant permanent loss of tax benefit for taxpayers with volatile business income, start-up businesses with initial losses, or taxpayers whose income and deductions fall in different tax years.

Source: Governor's FY26 Budget Recommendation: Personal Income Tax Introduction

## Contrast with Corporate Excise Tax

The prohibition on NOL carryforward applies only to personal income tax under M.G.L. c. 62. Massachusetts does permit corporations subject to the corporate excise tax under M.G.L. c. 63 to carry forward net operating losses for up to 20 years under certain circumstances, as provided in 830 CMR 63.30.2. The different treatment reflects a policy choice by the legislature to allow loss carryforwards for corporations but not for individuals, partnerships, or S corporations to the extent their income is taxed at the individual shareholder level under c. 62.

Source: 830 CMR 63.30.2: Net Operating Loss Deductions and Carry Forward; 830 CMR 62.17A.2 (confirming "Under the personal income tax provisions of M.G.L. c. 62, a net operating loss carryforward is not allowed")

Taxpayers subject to the 4% surtax on income exceeding the annually adjusted threshold must file their Massachusetts personal income tax returns and make all related tax payments electronically. Failure to comply with this electronic filing and payment requirement, without reasonable cause, may result in a penalty of up to $100 for each improper return or payment.

## Statutory Authority and Electronic Filing Mandate

Massachusetts General Law chapter 62C, section 33(g) authorizes the Commissioner of Revenue to require taxpayers to file returns and make payments by specified electronic means. The Department of Revenue has exercised this authority to mandate electronic filing and payment for all taxpayers subject to the 4% surtax. The Department's official surtax guidance states: "All taxpayers subject to the 4% surtax must file their returns and make all payments electronically." Taxpayers subject to the surtax may not file paper returns or submit paper checks; all submissions must be made through MassTaxConnect (the Department's online portal) or approved commercial tax software.

The electronic filing requirement applies to all returns, estimated tax payments, extension payments, and any other payments related to the personal income tax for any year in which the taxpayer is subject to the surtax. The surtax applies to taxable income exceeding $1,000,000 for tax year 2023, adjusted annually for inflation—the threshold for tax year 2025 is $1,083,150 (as stated in the guide's "Income Tax Rates" section).

Source: M.G.L. c. 62C, § 33(g); Massachusetts 4% Surtax on Taxable Income | Mass.gov

## Two-Step Penalty Process

The statute establishes a two-step process. If a taxpayer required to file or pay electronically instead submits a paper return or payment, the taxpayer "shall be considered not to have made the required filing or the required payment." The Commissioner, in addition to other remedies, sends the taxpayer a notice of improper filing or payment specifying the nonconformity.

After the notice is sent, if the taxpayer continues to fail to comply with the electronic method without reasonable cause, the Commissioner may assess a penalty of up to $100 for each improper return, document, or data transmission, and for each improper payment. The penalty is in addition to any other penalties that may apply, such as late-filing or late-payment penalties under M.G.L. c. 62C, § 33(a)–(c).

The penalty is considered assessed when the Commissioner issues a notice to the taxpayer setting out the penalty amount, the tax period and tax type affected, and the reason for the penalty. No separate notice of intention to assess or demand for payment is required.

Source: M.G.L. c. 62C, § 33(g)

## Reasonable Cause Defense

The electronic filing penalty may be waived or abated if the taxpayer demonstrates that the failure to file or pay electronically was due to reasonable cause and not willful neglect. M.G.L. c. 62C, § 33(g) expressly provides that "a penalty imposed by the commissioner for an improper filing or payment shall be subject to subsection (f) relative to the waiver of penalties."

To meet the reasonable cause standard, the taxpayer must establish that they exercised the same degree of care that an ordinary taxpayer in the same position would have exercised. Each request for waiver or abatement is evaluated based on its unique facts and circumstances. Administrative Procedure 633 confirms that the same reasonable cause factors applicable to late-filing and late-payment penalties apply to the electronic filing penalty.

Taxpayers should request an abatement using MassTaxConnect or Form ABT (Application for Abatement). Administrative Procedure 612 states that "taxpayers that are required to file their taxes electronically must also file abatement requests electronically." Electronic abatement requests are processed faster than paper applications.

Source: M.G.L. c. 62C, § 33(f), (g); AP 633: Guidelines for the Waiver and Abatement of Penalties | Mass.gov; AP 612: Interest and Penalties | Mass.gov

## Effect on Filing and Payment Acceptance

Although M.G.L. c. 62C, § 33(g) states that a taxpayer who fails to use the prescribed electronic method "shall be considered not to have made the required filing or the required payment," the statute's notice-and-penalty structure indicates that the Department does not treat a paper return as entirely unfiled or a paper payment as entirely unmade. The statute directs the Commissioner to send a notice of improper filing or payment (not a notice of non-filing), and the penalty applies only if the taxpayer fails to conform to the electronic requirement without reasonable cause after receiving that notice. The Department does not, in its published guidance, instruct taxpayers subject to the surtax that paper returns will be rejected outright. However, the Department's official e-filing guidance does warn that "if a return is mandated to be e-filed, and is instead filed on paper, it will not be processed."

A taxpayer who receives a notice of improper filing or payment should promptly file or pay electronically as required and, if applicable, submit an abatement request demonstrating reasonable cause for the initial paper submission.

Source: M.G.L. c. 62C, § 33(g); DOR E-filing and Payment Requirements | Mass.gov

Massachusetts allows several refundable and nonrefundable tax credits against personal income tax. The principal credits available to individual taxpayers include the earned income credit, the senior circuit breaker credit, the child and family tax credit, and the lead paint removal credit. Understanding each credit's eligibility requirements, calculation method, and refundability is essential for compliance and tax planning.

## Earned Income Tax Credit (EITC)

Massachusetts allows a refundable credit equal to 40% of the federal earned income credit claimed on the taxpayer's federal return. To qualify, the taxpayer must be eligible for and claim the federal EITC under IRC § 32 for the same taxable year. The credit is available to Massachusetts residents and part-year residents but not to nonresidents. For part-year residents, the credit is limited to 40% of the federal EITC multiplied by a fraction: the number of days the taxpayer resided in Massachusetts divided by the total days in the taxable year.

The 40% match rate is effective for tax years beginning on or after January 1, 2023, as enacted by St. 2023, c. 50. Prior to 2023, the credit was 30% of the federal amount. The Massachusetts EITC is fully refundable, meaning any excess over the taxpayer's tax liability is paid to the taxpayer. There is no Massachusetts-specific income phase-out; eligibility mirrors the federal EITC rules, which vary by filing status, number of qualifying children, and earned income.

Source: M.G.L. c. 62, § 6(h); TIR 24-4

## Circuit Breaker Credit for Seniors (Real Estate Tax Credit)

Massachusetts offers a refundable credit for taxpayers age 65 or older whose property tax payments (or rent payments) exceed 10% of their total income. The credit is commonly known as the "circuit breaker" credit and is authorized by M.G.L. c. 62, § 6(k).

Eligibility requirements:

• The taxpayer must be age 65 or older at the close of the taxable year.
• The taxpayer must be a Massachusetts resident or part-year resident (nonresidents are not eligible).
• For homeowners, the taxpayer must own and occupy a principal residence located in Massachusetts. The assessed valuation of the residence must not exceed an annually adjusted threshold. For tax year 2025, the threshold is $1,298,000 (before residential exemptions but after abatements); the threshold is adjusted annually by the cost-of-housing adjustment reflecting changes in the average assessed value of single-family homes in Massachusetts.
• For renters, the taxpayer must pay rent on property in Massachusetts under a good-faith rental agreement and must not receive a federal or state rent subsidy.
• The taxpayer's total income (Massachusetts AGI plus certain excluded income, less personal exemptions and certain deductions) must not exceed annually adjusted limits. For tax year 2025, the income limits are $75,000 for single filers, $94,000 for heads of household, and $112,000 for married filing jointly. These limits are adjusted annually for inflation using a cost-of-living adjustment.
• The taxpayer may not be claimed as a dependent on another taxpayer's return.
• Married taxpayers must file a joint return to claim the credit.

Credit calculation:

For homeowners, the credit equals the amount by which property tax payments (including 50% of separately stated water and sewer charges and stormwater fees) paid during the calendar year exceed 10% of the taxpayer's total income, up to a maximum credit amount. For renters, the credit equals the amount by which 25% of rent paid during the calendar year exceeds 10% of total income, up to the same maximum.

The maximum credit is adjusted annually for inflation. For tax year 2025, the maximum credit is $2,820. The base amount for the maximum credit was doubled beginning in tax year 2023 pursuant to St. 2023, c. 50, significantly increasing the credit value. The credit is fully refundable.

Source: M.G.L. c. 62, § 6(k); TIR 01-19 (as revised); TIR 25-7

## Child and Family Tax Credit

Effective for tax years beginning on or after January 1, 2023, Massachusetts allows a refundable, nontransferable child and family tax credit. The credit replaced two prior credits: the dependent care expense credit (former § 6(x)) and the household dependent credit (former § 6(y)).

Eligibility requirements:

A taxpayer may claim the credit if the taxpayer maintains a household that includes an individual who is:

1. Under age 13 and qualifies as a dependent for federal purposes, or
2. A dependent (or the taxpayer's spouse) who is physically or mentally incapable of taking care of himself or herself and principally lives with the taxpayer, or
3. A dependent age 65 or over, or a disabled dependent.

The credit cannot be claimed by:

• A person who is a nonresident for the entire taxable year, or
• Married taxpayers who file separate Massachusetts personal income tax returns.

Credit amount:

The credit is $310 per qualifying individual for tax year 2023, and $440 per qualifying individual for tax years beginning on or after January 1, 2024. There is no limit on the number of qualifying individuals for whom the credit may be claimed, and there is no income phase-out or cap. The credit is fully refundable.

Taxpayers may claim the credit for qualifying individuals who do not have a Social Security number or Individual Taxpayer Identification Number (ITIN). To do so, the taxpayer must request a Massachusetts Alternative Taxpayer Identification Number (MATIN) from the Department of Revenue for the qualifying individual. The taxpayer must still have an SSN or ITIN. The Massachusetts DOR guidance confirms that the taxpayer must file a paper return with "REQUEST ALTERNATIVE ID" written on the top and provide supporting documentation for the qualifying individual.

Source: M.G.L. c. 62, § 6(x); TIR 24-4; Massachusetts Child and Family Tax Credit | Mass.gov

## Lead Paint Removal Credit (Deleading Credit)

Massachusetts provides a nonrefundable credit to owners of residential premises who pay for the containment or abatement of dangerous levels of lead in pre-1978 dwelling units. The credit is governed by M.G.L. c. 62, § 6(e).

Two-tier credit structure:

1. Full compliance credit: An owner who brings a dwelling unit into full compliance with M.G.L. c. 111, §§ 189A–199B may claim a credit equal to the cost of removal, containment, or replacement of lead-containing materials, or $3,000 per dwelling unit, whichever is less.

1. Interim control credit: An owner who achieves interim control (partial remediation) may claim a credit equal to one-half the cost of removal, containment, or replacement, or $1,000 per dwelling unit, whichever is less. Any interim control credit counts toward the maximum full-compliance credit available.

Eligibility requirements:

• The presence of dangerous levels of lead must be established by a licensed inspector.
• Following deleading, the owner must obtain a letter of compliance (for full compliance) or letter of interim control (for interim control) from a licensed inspector.
• The owner must file the letter with the Department of Revenue by attaching it to Schedule LP with the owner's income tax return.
• Deleading work must be performed by an authorized person (licensed deleader, licensed lead-safe renovator, or a trained and authorized owner or agent).

The credit is nonrefundable, meaning it can reduce tax liability to zero but any excess is not refunded. However, unused credit may be carried forward for seven years. The credit applies only to dwelling units constructed prior to 1978 and located in Massachusetts.

Source: M.G.L. c. 62, § 6(e); 830 CMR 62.6.3

## Other Tax Credits Available Under M.G.L. c. 62, § 6

Massachusetts General Laws chapter 62, section 6 authorizes numerous additional credits. Many are business-oriented or industry-specific, though some are available to individuals who meet narrow eligibility criteria. Examples include:

Credits relevant to individuals:

• Credit for taxes paid to other jurisdictions (subsection (a)): A nonrefundable credit for income taxes paid to another state, territory, or Canadian province on income also subject to Massachusetts tax, subject to limitations.
• Septic system repair credit (Title V credit) (subsection (i)): Nonrefundable credit for repair or replacement of failed cesspools or septic systems at a principal residence, with carryforward. The maximum annual credit was increased to $2,400 (up to $12,000 total over six years) for tax years beginning on or after January 1, 2023, pursuant to St. 2023, c. 50.

Credits typically claimed by businesses or pass-through entities (but potentially allocable to individual owners):

• Film production credit (subsection (l)): Credits for payroll and production expenses related to motion picture production in Massachusetts.
• Life sciences credits (subsections (p), (q), (r), (t), (u)): Credits for investment in life sciences companies, research and development, and biotechnology facilities, administered by the Massachusetts Life Sciences Center.
• Historic rehabilitation credit (subsection (s)): Nonrefundable credit for certain rehabilitation expenses on certified historic structures.
• Conservation land credit (subsection (p)): Credit for qualified donations of certified land.
• Dairy farmer credit (subsection (v)): Refundable credit for eligible dairy farmers.

Most of these credits are nonrefundable and subject to annual or lifetime caps, certification requirements, or both. Practitioners should consult the relevant subsection of M.G.L. c. 62, § 6 and any implementing regulations or guidance issued by the Department of Revenue or the administering agency before claiming any credit.