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So I'm thinking about moving back up north, I'm from MA but since I've had a taste of freedom living here in VA, I'm thinking NH, If I'm a NH resident but work in MA how does income tax work? Do I just pay MA income like I live there, or nothing since I'd be a NH resident?
You file as a non-resident. If you have days that you are working, but are not actually in the state of MA (business travel, working from home), you can prorate the tax...
It would be nice if NH residents could work in MA and pay no income taxes, but that's not how it works. MA state taxes will be deducted from your check each pay period, and come tax prep time, you'll be filling out a MA NON-RESIDENT FORM. The good news is that you don't pay taxes on days that you don't work in the state of MA (working from home, vacation, holiday and sick paid days, etc).
Quote:
Originally Posted by snatale1
So I'm thinking about moving back up north, I'm from MA but since I've had a taste of freedom living here in VA, I'm thinking NH, If I'm a NH resident but work in MA how does income tax work? Do I just pay MA income like I live there, or nothing since I'd be a NH resident?
New Hampshire does have an income tax on dividends, interest and lottery winnings. It has sales taxes on hotel expenses, restaurant and hospital meals and tobacco. It also has a monopoly on hard booze sales.
There is one way where you can move to NH and not pay MA taxes and that is to incorporate yourself as an LLC or S-Corp--assuming the type of work you do would allow such an arrangement, such as consulting. You can do all the business you want to in MA as a company but not pay MA income taxes.
NH's business climate is very friendly towards small businesses and combined with many entrepreneurs fleeing MA taxes is why NH is a small business dynamo.
However, unless you're familiar with the incorporation process, it's always best to consult with a professional first. While you do avoid tax costs, there is a price to pay in tax compliance issues--there no such thing as a free lunch
It would be nice if NH residents could work in MA and pay no income taxes, but that's not how it works. MA state taxes will be deducted from your check each pay period, and come tax prep time, you'll be filling out a MA NON-RESIDENT FORM. The good news is that you don't pay taxes on days that you don't work in the state of MA (working from home, vacation, holiday and sick paid days, etc).
I'm very interested in this situation since it will be the one I'm in when we move to NH. I plan to work from home and go to MA once a week at most. My company will give me a W-2 form from MA.
My questions are:
How will I figure out what amount of MA income tax I owe?
How do I prove I work at home in NH?
Will my employer be adversely affected in any way if I work from home? (tax wise)
Should I hire a tax professional to help me with these questions? Other resources?
I need to educate myself about this and be prepared to address any concerns my employer may have.
I think I answered my own question.
According to MA tax law, I must pay full MA income tax even if I mostly work from home in NH. They have this exception called the Ancillary Activity Test (AAT), but it seems to be for people who are not working for a MA company.
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