Massachusetts has a state income tax
Yes. Massachusetts charges a state income tax on wages, investment income, and other earnings. The tax rate is a flat 5% on most types of income, though certain capital gains face a different rate. Unlike some states that have no income tax at all, Massachusetts residents and anyone earning income in the state must account for this tax when filing their state return.
The state income tax applies to residents and non-residents who earn money within Massachusetts. If you work in Massachusetts but live elsewhere, you typically owe Massachusetts income tax on those wages. If you live in Massachusetts but earn income out of state, you may owe tax to both Massachusetts and the other state, though Massachusetts offers credits to prevent double taxation.
Key Takeaways
- Massachusetts charges a flat 5% income tax on wages, salaries, and most other income, with limited exceptions.
- Long-term capital gains and certain investment income face a 5.1% tax rate instead of the standard 5%.
- You must file a Massachusetts return if you lived in the state for any part of the tax year and earned income, even if you also file federal returns.
- Massachusetts offers a tax credit for taxes paid to other states, so you do not pay tax twice on the same income.
The 5% tax rate on wages and most income
The standard Massachusetts income tax rate is 5% on wages, salaries, tips, and most other forms of earned income. This flat rate applies regardless of how much you earn — a person making $30,000 pays the same 5% rate as someone making $300,000. The rate has been set at 5% since 2002.
Interest income, dividend income from stocks, and income from rental properties also fall under the 5% rate. Self-employment income is taxed at 5% as well, though you also owe federal self-employment tax. Retirement distributions from traditional IRAs and 401(k) plans are taxed as income at the 5% rate.
Capital gains taxed at 5.1% instead of 5%
Long-term capital gains — profits from selling stocks, real estate, or other assets you held for more than one year — are taxed at 5.1% in Massachusetts, not the standard 5%. This applies to gains from the sale of securities and real property. Short-term capital gains (from assets held one year or less) are taxed at the regular 5% rate.
The difference between 5% and 5.1% is small but worth noting if you sell significant assets. For example, a $10,000 long-term capital gain would owe $510 in Massachusetts tax, compared to $500 at the standard rate. This higher rate on long-term gains has been in place since 2013.
Who must file a Massachusetts return
You must file a Massachusetts state return if you lived in the state for any part of the tax year and had income to report. This includes residents who moved out partway through the year and non-residents who worked in Massachusetts. The filing requirement exists even if you owe no tax after accounting for deductions and credits.
Massachusetts uses the same tax year as the federal government — January 1 through December 31. Your state return is due on the same date as your federal return, typically April 15, though the important date shifts if that date falls on a weekend or holiday. You file your state return separately from your federal return, though both use similar income and deduction information.
Deductions and credits available in Massachusetts
Massachusetts allows a standard deduction similar to the federal standard deduction, though the state amount differs from the federal amount. For the 2024 tax year, the Massachusetts standard deduction is $6,950 for single filers and $13,900 for married filing jointly. If you itemize deductions on your federal return, you may also itemize on your state return, though state-specific limits explore.
The state offers a dependent exemption of $215 per dependent for the 2024 tax year, which reduces your taxable income. Massachusetts also has a earned income tax credit for lower-income workers, which works similarly to the federal version. If you paid income tax to another state on the same income, you can claim a credit on your Massachusetts return to avoid paying tax twice.
How Massachusetts income tax differs from federal tax
Massachusetts income tax is separate from federal income tax, and the two systems have different rules. The state does not allow deductions for state and local taxes (SALT) paid, even though the federal return does. Massachusetts also does not recognize certain federal deductions, such as the deduction for student loan interest, so you may owe state tax on income that is not subject to federal tax.
The Massachusetts tax rate is flat at 5% (or 5.1% for long-term capital gains), whereas federal tax uses a progressive system with rates ranging from 10% to 37% depending on income level. This means your effective federal tax rate likely varies from your state rate. Both systems require you to report the same income, but the tax owed to each can be quite different.
Where to file your Massachusetts return
You file your Massachusetts state return with the Massachusetts Department of Revenue. The department accepts returns by mail, electronic filing through approved software, or through a tax professional. Most people file electronically because it is faster and reduces errors.
The mailing address for paper returns is listed on the Massachusetts Department of Revenue website. If you file electronically, you submit your return directly to the state through approved tax software or a tax preparer's system. The state provides a list of approved e-file providers on its website.
Frequently Asked Questions
Do I owe Massachusetts income tax if I only worked there part of the year?
Yes, if you lived in Massachusetts for any part of the tax year and earned income, you must file a state return. You report only the income earned during the months you lived in the state. If you moved to Massachusetts partway through the year, you report income from that date forward; if you moved out, you report income only through your move date.
What if I live in Massachusetts but work in another state?
You owe Massachusetts income tax on all income you earn, including income from work in another state. However, you can claim a credit on your Massachusetts return for taxes paid to the other state, so you do not pay tax twice on the same income. The credit is limited to the lesser of the tax paid to the other state or the Massachusetts tax on that income.
Are Social Security benefits taxed in Massachusetts?
No. Massachusetts does not tax Social Security benefits, even though the federal government may. This is one area where state tax rules differ significantly from federal rules. If Social Security is your only income, you likely owe no Massachusetts state tax.
Do I have to file if I owe no tax?
Massachusetts requires you to file if you lived in the state for any part of the year and had income to report, even if you owe no tax after deductions and credits. Filing is required to determine whether you owe tax or are due a refund. Some people file even when not required because they are due a refund from taxes withheld.
What happens if I do not file a Massachusetts return?
The Massachusetts Department of Revenue can assess penalties and interest on unpaid taxes. If you owe tax and do not file, the penalty is typically 5% of the unpaid tax per month, up to 25%. Interest accrues daily on the unpaid amount. Filing late is better than not filing at all, because the penalty for filing late is smaller than the penalty for not filing.