Massachusetts has a flat income tax rate of 5.0% on most income

Massachusetts taxes your income at a single rate: 5.0% on wages, salaries, and most other income. This rate applies to nearly all residents and has been set at this level since 2002. Unlike some states that use brackets where higher earners pay higher percentages, Massachusetts uses the same 5.0% rate regardless of how much you earn.

The state also taxes capital gains—profits from selling investments—at the same 5.0% rate. Interest and dividend income are taxed at 5.0% as well. A few narrow categories of income are taxed differently or not at all, which this guide covers below.

You owe Massachusetts income tax if you live in the state or work there, even if you live elsewhere. If you work in Massachusetts but live in another state, you may owe tax to both states, though you can usually claim a credit on your home state return to avoid paying twice on the same income.

Key Takeaways

  • Massachusetts taxes most income at a flat 5.0% rate, with no higher brackets for higher earners.
  • Capital gains, dividends, and interest income are all taxed at 5.0%, the same as wages.
  • Long-term capital gains on assets held more than one year are taxed at 5.0%, not at a lower federal rate.
  • Certain income types—including Social Security benefits, municipal bond interest, and some retirement distributions—are not taxed by Massachusetts.
  • You file your state return using Form 1, the Massachusetts resident income tax return, which you can submit on paper or electronically.

What income is taxed and what is not

Massachusetts taxes wages, salaries, self-employment income, rental income, and most business income at 5.0%. If you receive a W-2 from an employer, that income is taxed. If you run your own business, your net profit is taxed. If you own rental property, the rent you collect minus expenses is taxed.

Social Security benefits are not taxed by Massachusetts, even though they may be taxed by the federal government. Distributions from traditional IRAs and 401(k) plans are taxed as ordinary income at 5.0%. However, distributions from Roth IRAs are not taxed because you already paid tax on the money when you contributed it.

Interest from bonds issued by Massachusetts cities and towns is not taxed. Interest from bonds issued by other states is taxed at 5.0%. Certain retirement income—including military pensions and some public employee pensions—may be fully or partially exempt, depending on your age and the type of pension. The state publishes a list of which pensions may have access to.

How the tax is calculated and withheld

Your employer withholds Massachusetts income tax from your paycheck based on a withholding form you complete when you start work. The form is called the Massachusetts W-4, and it tells your employer how much to hold back. If you claim too many exemptions, too little tax is withheld and you owe money when you file. If you claim too few, too much is withheld and you receive a refund.

The amount withheld is calculated by explore the 5.0% rate to your gross pay minus a standard deduction. For 2024, the standard deduction is $4,400 for single filers and $8,800 for married filers filing jointly. If you have other income sources—freelance work, rental income, investment income—you may need to make estimated tax payments quarterly if you expect to owe more than $400 at tax time.

Self-employed people do not have an employer to withhold tax, so they must calculate and pay estimated taxes four times a year: April 15, June 17, September 16, and January 15 of the following year. You can pay online through the Massachusetts Department of Revenue website or by mail.

Filing your Massachusetts tax return

You file your state return using Form 1, the Massachusetts resident income tax return. You must file if your income exceeds the filing threshold, which depends on your filing status and age. For most people under 65, you file if your income is more than your standard deduction. If you are 65 or older, the threshold is higher.

You can file on paper by mailing Form 1 and supporting documents to the Massachusetts Department of Revenue, or you can file electronically through the state's online system or through tax software. Electronic filing is faster and reduces errors. The important date is April 15, the same as the federal important date, though you can request an extension to October 15.

When you file, you report all income you earned during the year, subtract the standard deduction, and multiply the result by 5.0%. You then subtract any tax already withheld by your employer. If more was withheld than you owe, you receive a refund. If less was withheld, you owe the difference.

Deductions and credits available in Massachusetts

Massachusetts allows you to take either the standard deduction or itemized deductions, just like the federal return. Most people use the standard deduction because it is simpler and results in a lower tax bill. If you own a home and pay mortgage interest and property taxes, or if you give to charity, itemizing may save you more money. You calculate itemized deductions on Schedule A and attach it to your return.

The state also offers several tax credits that reduce your tax dollar-for-dollar. The Earned Income Tax Credit (EITC) is available to low- and moderate-income workers and is worth up to several hundred dollars depending on your income and family size. The Child and Dependent Care Credit helps offset the cost of childcare. The Dependent Exemption Credit provides a credit for each dependent you claim.

If you pay tax to another state on the same income, you can claim a credit on your Massachusetts return to avoid double taxation. This is common for people who work in one state and live in another. You calculate the credit on Schedule CR and attach it to your return.

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 file Form 1-NR/PY instead of Form 1, and you report only the income from the months you lived in Massachusetts. You must include documentation of when you moved, such as a lease or utility bill showing your new address.

If you worked in Massachusetts but lived in another state all year, you are a nonresident. You owe Massachusetts tax on income you earned in the state, but not on income from other sources. You file Form 1-NR/PY and report only Massachusetts-source income. Your home state may also tax the same income, but you can claim a credit on your home state return.

When and how to pay if you owe

If you file your return and owe tax, you can pay online through the Department of Revenue website, by mail with a check, or by phone. The important date to pay is April 15, the same as the filing important date. If you cannot pay in full, you can request a payment plan. The state charges interest on unpaid tax at a rate set quarterly, currently around 8% per year, plus penalties if the tax remains unpaid.

If you expect to owe a large amount, you can make a payment before you file to reduce what you owe at tax time. Many people do this if they have self-employment income or other income not subject to withholding. You can pay estimated taxes online or by mail at any time during the year.

Frequently Asked Questions

Do I have to pay Massachusetts income tax if I work there but live in another state?

Yes, you owe Massachusetts tax on income you earn in the state. However, your home state may also tax the same income. You can claim a credit on your home state return for tax paid to Massachusetts to avoid paying both states on the same money.

Is Social Security taxed in Massachusetts?

No, Massachusetts does not tax Social Security benefits. You do not report them on your state return, even if you report them on your federal return.

What if I did not have enough tax withheld and owe money?

You can pay the full amount by April 15, or you can request a payment plan. The state charges interest on unpaid balances. You can also adjust your W-4 with your employer so less is withheld in future paychecks, though this will not reduce what you owe for the current year.

Can I file my Massachusetts return electronically?

Yes, you can file electronically through the state website, through tax software, or through a tax professional. Electronic filing is faster and reduces errors compared to mailing a paper return.

What is the standard deduction for Massachusetts?

For 2024, the standard deduction is $4,400 for single filers and $8,800 for married filers filing jointly. The amount increases slightly each year. If you are 65 or older, you get an additional deduction.