MA State Taxes - File federal MFJ and state MFS?

[julianthecat 11]

Any fellow Massholes around?  I'm working on our 2020 tax return, which will be the first one we file jointly after getting married in 2019.  My wife entered the US with a CR1 in January 2021 and now has her SSN (we filed MFS for 2019 because she didn't have her SSN and we didn't want to send in her passport with Covid-related delays).  All looked good, including claiming the previous stimulus checks as the Recovery Rebate Credit, until I got to the state tax return.  Her foreign income was well under the threshold for claiming the full exclusion on form 2555.  

 

Apparently, MA does not allow you to deduct foreign earned income on your taxes, even though it's federally deductible. So, to get the $1800 in stimulus payments, we end up owing $2050 in state taxes on her foreign income.  Since she was a nonresident for the entire year of 2020 and earned no income in MA, she is not required to file a return in MA.  Does anyone have experience with filing a MFJ federal return and then a MFS state return for just the US-based spouse?  

[Ayrton 965]

21 minutes ago, julianthecat said:

Any fellow Massholes around?  I'm working on our 2020 tax return, which will be the first one we file jointly after getting married in 2019.  My wife entered the US with a CR1 in January 2021 and now has her SSN (we filed MFS for 2019 because she didn't have her SSN and we didn't want to send in her passport with Covid-related delays).  All looked good, including claiming the previous stimulus checks as the Recovery Rebate Credit, until I got to the state tax return.  Her foreign income was well under the threshold for claiming the full exclusion on form 2555.  

 

Apparently, MA does not allow you to deduct foreign earned income on your taxes, even though it's federally deductible. So, to get the $1800 in stimulus payments, we end up owing $2050 in state taxes on her foreign income.  Since she was a nonresident for the entire year of 2020 and earned no income in MA, she is not required to file a return in MA.  Does anyone have experience with filing a MFJ federal return and then a MFS state return for just the US-based spouse?  

I'm assuming you're using a software to e-file. You will have to file everything by paper. Since this is the first year you're filing jointly and your wife was a nonresident alien for the whole year of 2020, you will have to write down a statement where you both say you want to treat her as a resident Alien for the whole year of 2020.

 

I'm not familiar with MA, but I believe that since she didn't live in MA last year, you won't be able to file jointly with her, so your only option is to file separately. And that's easy since everything needs to be done by paper.

[SteveInBostonI130 3,447]

Just file MFS for MA.  It is no different than many others who live in a border state and work in MA, while their spouses work on the other state.

[julianthecat 11]

Thanks @Ayrton and @SteveInBostonI130 for the quick replies!  It looks like I can e-file federally still through TaxAct, and then prepare a separate paper return for MA.  

[Ayrton 965]

Just now, julianthecat said:

Thanks @Ayrton and @SteveInBostonI130 for the quick replies!  It looks like I can e-file federally still through TaxAct, and then prepare a separate paper return for MA.  

Make sure you follow their instructions to upload the statement.