Does Massachusetts Collect State Taxes?
An overview of Massachusetts state taxes. Learn how the state's flat-rate income tax works and the criteria for who is required to file a return.
Massachusetts does collect a state income tax from its residents, non-residents, and part-year residents. This tax is a source of revenue for the state, funding various public services and programs. The state employs a structured system to determine who must file a return and how much they owe, with different rules based on residency status and income type.
Massachusetts Income Tax Rates
Massachusetts applies a flat tax rate of 5% to most classes of income. This single rate applies to both earned income, such as wages and salaries, and most types of unearned income. This approach differs from the progressive tax system used by the federal government and many other states, where tax rates increase as income rises.
An exception to the 5% flat rate involves certain types of capital gains. Short-term capital gains, which are profits from the sale of assets held for one year or less, are taxed at a higher rate of 8.5%. Long-term gains from the sale or exchange of collectibles are taxed at 12%. An extra 4% surtax is also levied on annual income that exceeds $1 million, bringing the top rate on that income portion to 9%.
Who Is Required to File
The requirement to file a Massachusetts state tax return depends on an individual’s residency status and gross income. A full-year resident must file if their Massachusetts gross income for the year is more than $8,000. This threshold applies to income from all sources, and the rule is applied per person.
Non-residents are also required to file a Massachusetts return if their income from sources within the state exceeds $8,000 or a prorated personal exemption, whichever is lower. This includes income earned from a job or business activities in the state. Part-year residents must also file if they meet these thresholds and are taxed on income earned from any source during their residency period and on Massachusetts-source income during their non-resident period.
Other State-Level Taxes
Beyond the personal income tax, Massachusetts levies several other statewide taxes. The state sales tax is set at a flat rate of 6.25% on the sale of most tangible goods and certain services. Unlike in many other states, there are no additional local sales taxes imposed by cities or counties in Massachusetts.
The state also imposes an estate tax on the transfer of property from a deceased person to their heirs. For estates of individuals who died on or after January 1, 2023, this tax applies to estates valued at over $2 million. It is important to distinguish these from property taxes, which are assessed and collected at the local level by individual municipalities, not by the state government.