Live in NH, Work in MA: Tax Rules and What You Need to Know
Understand key tax rules for New Hampshire residents working in Massachusetts, including withholding, filings, and potential credits to optimize your tax situation.
Living in New Hampshire but working in Massachusetts creates tax complexities. New Hampshire does not have an income tax, while Massachusetts does, making it essential to understand how this affects your paycheck and tax filings.
Residency Status and Domicile
Massachusetts and New Hampshire define residency differently for tax purposes. Residency is where you live, while domicile is your permanent home—the place you intend to return to. If your primary home is in New Hampshire and you only travel to Massachusetts for work, you are classified as a nonresident for Massachusetts tax purposes.
Massachusetts considers you a resident if you maintain a permanent home in the state or spend more than 183 days there in a calendar year. Nonresidents are taxed only on income earned in Massachusetts, while residents are taxed on all income, regardless of where it is earned.
Domicile is determined by factors such as voter registration, driver’s license issuance, and financial accounts. If you move to Massachusetts and take steps that indicate an intent to stay permanently—such as buying a home or enrolling children in local schools—you may be considered a resident for tax purposes.
Income Tax Withholding
Massachusetts requires employers to withhold state income tax from wages earned within its borders, even if the employee resides in New Hampshire. If you work for a Massachusetts-based employer, a portion of your paycheck will be withheld at the state’s flat 5% income tax rate in 2024. Employers use Massachusetts Form M-4 to determine the correct withholding amount.
Since New Hampshire does not tax earned income, there is no offsetting state tax obligation. Massachusetts does not exempt nonresidents from withholding based on residency alone. The determining factor is where the work is physically performed. If you commute to Massachusetts for work, your employer must withhold Massachusetts income tax.
For remote or hybrid workers, withholding can be more complicated. Massachusetts generally requires withholding based on where the work is performed. However, some employers may default to withholding Massachusetts taxes based on the company’s primary office location, even if the employee works remotely in New Hampshire. Reviewing pay stubs and tax forms, such as the W-2, can help identify whether Massachusetts taxes are being withheld incorrectly.
State Tax Filings
New Hampshire residents earning income in Massachusetts must file a Massachusetts Nonresident/Part-Year Resident Income Tax Return (Form 1-NR/PY). This form reports only the income earned in Massachusetts. With the state’s flat 5% income tax rate in 2024, taxable Massachusetts wages are multiplied by this rate to determine the amount owed.
Massachusetts offers a standard deduction of $4,400 for single filers and $8,800 for married couples filing jointly. Certain expenses, such as student loan interest and medical savings account contributions, may also be deductible. Taxpayers should review Schedule Y to determine eligibility for available deductions and credits.
The Massachusetts state tax return is due on April 15, 2025, for the 2024 tax year. Late filings can result in penalties, including a 1% monthly charge on unpaid taxes, up to a maximum of 25%. Interest accrues on any outstanding balance. To avoid penalties, taxpayers should ensure withholding is sufficient or make estimated payments if additional tax is expected.
Remote or Hybrid Work Considerations
The shift to remote and hybrid work has created new tax implications for employees living in New Hampshire and working for Massachusetts-based companies. Massachusetts generally taxes wages based on where the work is performed, but some employers may still withhold Massachusetts taxes for remote employees. Employers must correctly classify work locations, as improper tax withholding can lead to compliance issues and penalties under Massachusetts tax laws.
Employees working remotely in New Hampshire should ensure their employer properly tracks their work location to avoid unnecessary Massachusetts tax withholdings. If an employer refuses to adjust withholding, employees may need to file a Massachusetts nonresident return to claim a refund for improperly taxed wages.
Potential Tax Credits or Refunds
Nonresidents may be eligible for credits or refunds that reduce their tax burden. A refund may be available if an employer withholds Massachusetts income tax for remote work performed entirely in New Hampshire. Since Massachusetts only taxes income earned within its borders, wages earned remotely in New Hampshire should not be subject to Massachusetts tax. Employees in this situation can file a Massachusetts nonresident return (Form 1-NR/PY) and use Schedule R/NR to allocate income properly, potentially resulting in a refund of incorrectly withheld taxes. Keeping detailed records of work locations, such as time-tracking software or employer verification, can strengthen a refund claim.
Massachusetts also offers tax credits that may benefit nonresidents, such as the Commuter Deduction, which allows deductions for public transit and toll expenses exceeding $150 annually, up to a maximum of $750. Additionally, the Earned Income Credit (EIC) is available to qualifying low-income workers, based on federal EIC qualifications. Taxpayers should review Massachusetts Schedule CMS to determine whether they qualify for any available credits, as these can directly reduce the amount owed or increase a refund.