Massachusetts charges a flat income tax rate of 5.0 percent on most income
Massachusetts has one of the simplest income tax structures in the country: a single flat rate of 5.0 percent applies to wages, salaries, and most other income. This means whether you earn $30,000 or $300,000 per year, the state takes the same percentage. The rate has been 5.0 percent since 2002, though voters have periodically proposed changing it.
The 5.0 percent rate applies to your federal adjusted gross income minus any deductions Massachusetts allows. This is different from federal income tax, which uses multiple tax brackets that increase as your income rises. Because Massachusetts uses a flat rate, your tax bill grows proportionally with your income, but the percentage stays the same.
Key Takeaways
- Massachusetts income tax is a flat 5.0 percent on wages, salaries, and most other income, with no higher brackets for higher earners.
- Long-term capital gains and dividends are taxed at 5.0 percent, while short-term capital gains follow the regular income tax rate.
- You can deduct the federal standard deduction or itemized deductions, plus a personal exemption of $4,400 per person (as of 2024).
- Massachusetts allows credits for dependent children, property taxes, and certain education expenses that reduce your final tax bill.
- Your employer withholds estimated tax from each paycheck based on a W-4 form you complete when hired.
What income is subject to the 5.0 percent rate
The 5.0 percent rate applies to wages and salaries, self-employment income, rental income, and most other sources. Long-term capital gains (profits from selling stocks or property held more than one year) are also taxed at 5.0 percent in Massachusetts, which is lower than the federal rate but higher than some other states.
Short-term capital gains—profits from selling assets held one year or less—are taxed as ordinary income at the same 5.0 percent rate. Interest income from savings accounts and bonds counts as ordinary income. Retirement distributions from traditional IRAs and 401(k) plans are taxed at 5.0 percent when you withdraw them.
Some income is exempt. Social Security benefits are not taxed by Massachusetts. Certain retirement income, including military pensions and some public employee pensions, may be fully or partially exempt depending on your age and when you retired. Municipal bond interest is exempt from state tax.
Deductions and exemptions that lower your taxable income
Before the 5.0 percent rate is applied, you subtract deductions and exemptions. You can use either the federal standard deduction or itemize deductions on your Massachusetts return—whichever is larger. The federal standard deduction for 2024 is $14,600 for single filers and $29,200 for married couples filing jointly.
Massachusetts also allows a personal exemption of $4,400 per person (as of 2024). If you are married filing jointly, you claim $4,400 for yourself and $4,400 for your spouse. Dependents also may have access to for exemptions, though the rules are more limited than they were before 2018.
If you itemize, you can deduct state and local property taxes, mortgage interest, charitable donations, and certain medical expenses. Massachusetts does not allow a deduction for state income tax paid, even though you are paying it. The total of all deductions and exemptions reduces the income that gets taxed at 5.0 percent.
Tax credits that reduce what you owe
After you calculate your tax using the 5.0 percent rate, you can subtract tax credits. Credits are more valuable than deductions because they reduce your actual tax bill dollar-for-dollar, rather than reducing the income that gets taxed.
Massachusetts offers a dependent exemption credit of $218 per dependent child (as of 2024). If you paid property taxes on your home, you may may have access to for a property tax credit if your income is below certain thresholds. The credit phases out as income rises, so higher earners do not receive it.
Education-related credits include a credit for tuition paid to Massachusetts colleges and universities, and a credit for contributions to a Massachusetts college savings plan (529 plan). These credits are limited and have income caps. You can also claim the federal Earned Income Tax Credit on your state return if you may have access to.
How withholding works and what to do if too much or too little is taken
When you start a job in Massachusetts, you complete a W-4 form that tells your employer how much state income tax to withhold from each paycheck. Your employer sends that withheld amount to the state on your behalf. The goal is to withhold roughly the amount of tax you will owe, so you do not owe a large bill or receive a large refund when you file.
If too much is withheld, you receive a refund when you file your return. If too little is withheld, you owe the difference. You can adjust your withholding at any time by submitting a new W-4 to your employer—for example, if you got married, had a child, or took a second job.
Self-employed people and those with income not subject to withholding must make estimated tax payments to Massachusetts four times per year. These payments are due in April, June, September, and January. The state provides a worksheet to calculate how much to pay based on your expected income.
Filing your Massachusetts tax return
You file your Massachusetts income tax return using Form 1, the Massachusetts Individual Income Tax Return. You must file if your income exceeds the filing threshold, which depends on your age and filing status. For most people under 65, the threshold is around $15,000 of income. You file at the same time as your federal return, typically by April 15.
You can file online using tax software, by mail, or through a tax professional. Massachusetts accepts federal e-file, which means you can file both your federal and state returns electronically at the same time. If you file electronically and are due a refund, you receive it faster than if you mail a paper return.
If you cannot file by April 15, you can request an extension. An extension gives you until October 15 to file, but it does not extend the important date to pay any tax you owe. If you owe tax and do not pay by April 15, you will owe interest and penalties on the unpaid amount.
Special situations: part-year residents and nonresidents
If you moved to or from Massachusetts during the year, you are a part-year resident. You owe Massachusetts tax only on income earned while you lived in the state. You must file a part-year resident return and report your income by the dates you moved.
If you worked in Massachusetts but lived in another state, you may owe Massachusetts tax on that income even though you are not a resident. Massachusetts taxes income earned within the state by nonresidents. However, you can claim a credit on your home state return for taxes paid to Massachusetts to avoid double taxation.
Military members stationed in Massachusetts may be exempt from state income tax on military pay, depending on their home state and the terms of the military service. Check with your payroll office or a tax professional if you are military and stationed in the state.
Frequently Asked Questions
Do I have to file a Massachusetts return if I only lived there part of the year?
Yes, if you earned income while living in Massachusetts, you must file a part-year resident return. You report only the income earned during the months you lived in the state. Include the dates you moved in and out on your return.
Is Social Security taxed in Massachusetts?
No. Massachusetts does not tax Social Security benefits. If Social Security is your only income, you do not have to file a state return. If you have other income, you still do not include Social Security in your taxable income.
What happens if I do not file or pay by the important date?
The state charges interest on unpaid tax at a rate set quarterly, currently around 8 percent per year. You also face a failure-to-pay penalty of 0.5 percent per month of the unpaid amount, up to 25 percent total. Filing late without paying also triggers a failure-to-file penalty.
Can I deduct state income tax paid on my federal return?
You can deduct state income tax paid, but only as part of the state and local taxes (SALT) deduction on your federal return, which is capped at $10,000. This deduction is separate from your Massachusetts return and does not reduce your Massachusetts tax.
What is the difference between a credit and a deduction?
A deduction reduces the income that gets taxed. A credit reduces your actual tax bill. A $1,000 deduction saves you $50 in tax (at the 5.0 percent rate), while a $1,000 credit saves you $1,000. Credits are always more valuable.