Question

Foreign income inclusion on state tax

Forum|Forum|7 years ago
June 1, 2019
1 reply
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I lived and worked in Israel (for a local company) for the entirety of 2016, and also paid local taxes. Prior to that I was a resident of Massachussets. Do I need to file an MA state tax? Is it possible to get a foreign income exclusion? Currently TurboTax is not offering any of these options, and is taxing me for the full amount I earned abroad, without taking any of the above parameters into consideration.

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ChristinaS

Employee

Those parameters are not taken into consideration if you are a resident of Massachusetts.

I am unaware of any state having an equivalent to the Foreign Earned Income Exclusion, or allowing a credit for taxes paid to a foreign state/ locality. In general, to minimize/ avoid state tax, you would have to no longer be a resident of Massachusetts. The federal government considers citizens and long term resident taxpayers for their whole lives (expatriation aside), but you are not tied to your "home state" forever. The link below remains on the MA tax site as a source for determining residency.

Since you were abroad all year, it will likely come down to whether or not you have a permanent home in the State of Massachusetts. Most states have a similar basis for residency rules.

Here's what Massachusetts considers a resident- apply this to your situation to determine if you have to file an MA return for the portion of the year that you were abroad:

http://www.mass.gov/dor/businesses/help-and-resources/legal-library/tirs/tirs-by-years/1990-1999-rel...

If you have to file a Massachusetts return, the credit for taxes paid cannot be taken.

"The credit is not allowed for: taxes paid to the U.S. government or a foreign country other than Canada; city or local tax; and interest and penalty paid to another jurisdiction."