Schedule 3K-1 is a Massachusetts state tax form that reports each partner’s share of a partnership’s income, deductions, and credits as calculated under Massachusetts tax law. It is not a federal form and has no direct IRS equivalent. The partnership files it as part of Form 3, the Massachusetts Partnership Return of Income, and hands each partner a completed copy to use when preparing their individual Massachusetts return.1Commonwealth of Massachusetts Department of Revenue. 2025 Instructions for Massachusetts Partnership Return Form 3 The numbers on it almost never match the corresponding boxes on the federal Schedule K-1, because Massachusetts defines taxable income differently than the Internal Revenue Code does.
If you’re a partner in a Massachusetts partnership, the 3K-1 is your primary document for filing at the state level. The partnership does the heavy lifting: it performs the state-specific adjustments, calculates apportionment for nonresidents, and figures out any entity-level credits before the form reaches you. Massachusetts requires all partnerships to file Form 3 and Schedule 3K-1 electronically; there is no minimum partner count or income threshold that exempts a partnership from the e-file rule.2Mass.gov. DOR E-filing and Payment Requirements
Why the Numbers Don’t Match Your Federal K-1
Ordinary business income on a 3K-1 is a Massachusetts-specific figure. Massachusetts taxes some things the federal government exempts and exempts some things the federal government taxes, so the partnership has to run every line through state rules first.
Two common adjustments run in opposite directions. Interest on U.S. debt obligations is taxable federally but exempt in Massachusetts, so the 3K-1 breaks it out separately so you can subtract it on your state return. Interest from municipal bonds issued by states other than Massachusetts is exempt federally but taxable here, so the 3K-1 adds it back in.3Mass.gov. Massachusetts Partnership Form 3 Instructions – Schedule 3K-1
Guaranteed payments get their own line. Massachusetts treats guaranteed payments to nonresident partners as ordinary income of the partnership for apportionment purposes, which means the state can reach those payments even when the receiving partner never worked in Massachusetts.3Mass.gov. Massachusetts Partnership Form 3 Instructions – Schedule 3K-1 The form also adds back certain state and local income taxes that were deducted at the entity level federally but are not deductible under Massachusetts rules.
Apportionment for Nonresident Partners
If you live outside Massachusetts, the apportionment figure on your 3K-1 is the number that matters most. It tells you how much of the partnership’s income Massachusetts can actually tax you on. Massachusetts uses a single sales factor formula: the ratio of the partnership’s Massachusetts sales to its total sales everywhere.4Mass.gov. Single Sales Factor A partnership with 40% of its revenue from Massachusetts customers apportions 40% of its income to the state.
A nonresident partner’s 3K-1 typically shows two columns: total distributive share and the apportioned amount. Only the apportioned amount flows to your Massachusetts nonresident return. Interest on U.S. debt obligations is an exception; the 3K-1 reports the full share without apportionment because that income is exempt in Massachusetts regardless of source.
The Pass-Through Entity Tax Credit
Since 2021, Massachusetts partnerships can elect annually to pay a 5% entity-level excise on the partnership’s income. This Pass-Through Entity Tax, or PTET, exists mainly as a workaround for the federal $10,000 cap on state and local tax deductions.5Mass.gov. Elective Pass-through Entity Excise
When a partnership makes the election, the 3K-1 calculates each qualified partner’s share of the entity-level tax and reports a refundable credit equal to 90% of that amount on line 42e, which flows directly to your individual Massachusetts return.1Commonwealth of Massachusetts Department of Revenue. 2025 Instructions for Massachusetts Partnership Return Form 3 One point catches partners off guard: you still report your full distributive share of partnership income. You cannot reduce reported income by the amount the partnership paid in PTET. The 90% credit compensates you instead.
Publicly traded partnerships cannot make the election. Single-member LLCs disregarded for federal tax purposes are also ineligible because they’re not treated as pass-through entities.5Mass.gov. Elective Pass-through Entity Excise
Withholding and the Composite Return Option
Massachusetts requires partnerships to withhold tax on each nonresident partner’s Massachusetts-source income at the Part B individual income tax rate. Withholding is based on the lesser of 80% of the partner’s current-year distributive share or 100% of the prior-year share, paid in quarterly installments.6Mass.gov. Tax Guide for Pass-Through Entity Withholding
A partner can avoid the withholding by certifying to the partnership that they’ll file their own Massachusetts return, by electing to participate in a composite return, or by showing an exemption.6Mass.gov. Tax Guide for Pass-Through Entity Withholding Without one of those, the partnership must withhold.
A composite return lets the partnership file and pay Massachusetts tax on behalf of two or more qualifying nonresident partners as a group, so those partners don’t file individual Massachusetts returns. To qualify, a nonresident partner must have no other Massachusetts-source income for the entire year and must waive the right to claim individual deductions, exemptions, and credits on a Massachusetts return.7Mass.gov. Letter Ruling 98-13 Composite Return Filing If the Department of Revenue later finds you had other Massachusetts-source income, composite participation won’t satisfy your individual filing obligation.
The 4% Surtax on High Incomes
Massachusetts imposes a 4% surtax on taxable income above an annually adjusted threshold. For tax year 2025, that threshold is $1,083,150.8Mass.gov. Massachusetts 4% Surtax on Taxable Income Income above the line is taxed at 9% (the standard 5% rate plus the 4% surtax).9Mass.gov. Massachusetts Tax Rates Your 3K-1 income counts toward that threshold, so a large distributive share can push you over even when your other income is modest.
Moving 3K-1 Figures to Your Individual Return
Nonresident partners use the apportioned income figures from the 3K-1 to complete Form 1-NR/PY, the Massachusetts Nonresident and Part-Year Resident Income Tax Return, which includes Schedule R/NR for calculating the portion of income taxable by Massachusetts.10Massachusetts Department of Revenue. 2025 Form 1-NR/PY Instructions Transfer the line items from the 3K-1 (ordinary income, capital gains, interest adjustments, PTET credit) to the corresponding schedules on your individual return.
If you live in another state, you report the full distributive share on your home-state return and then claim a credit for taxes paid to Massachusetts. Your home state’s credit form will ask for the tax you paid to Massachusetts, which you calculate from the 3K-1’s apportioned income and the Massachusetts rate. The 3K-1 is the supporting document your home state will want if questions come up.
Deadlines and What Happens if the 3K-1 Is Late
Massachusetts partnerships on a calendar year must file Form 3, including all Schedules 3K-1, by March 15. For 2026, that falls on March 16 because of the weekend.1Commonwealth of Massachusetts Department of Revenue. 2025 Instructions for Massachusetts Partnership Return Form 3 An automatic six-month extension pushes the deadline to September 15, 2026, for calendar-year filers.11Mass.gov. Massachusetts DOR Tax Due Dates and Extensions
The failure-to-file penalty on the partnership is $5 for every day the return is late.12Mass.gov. AP 612 Interest and Penalties For a partner, the practical problem is different: a late Form 3 means late 3K-1s, and every partner is stuck waiting to file their own Massachusetts return. If your 3K-1 hasn’t shown up, the partnership’s filing status is almost always the reason.