Massachusetts Tax Guide: Flat Rate & Millionaire Surtax

Understand Massachusetts' flat income tax, the new millionaire surtax, and all state tax obligations for 2025.

5.0%

Flat Income Tax Rate

+4%

Millionaire Surtax

6.25%

Sales Tax Rate

1.15%

Property Tax Rate

Tax Overview

Massachusetts uses a flat income tax rate of 5% on most types of income, making it relatively straightforward compared to states with progressive systems. However, beginning in 2023, the state added a 4% surtax on annual income exceeding $1 million, effectively creating a 9% rate on income above that threshold. This "millionaire tax" was approved by voters and generates revenue earmarked for education and transportation.

Sales tax in Massachusetts is 6.25% with no local additions. The state exempts groceries, clothing items under $175, and prescription medications from sales tax. This clothing exemption provides meaningful savings for residents compared to neighboring states with broader sales tax bases. Massachusetts also holds an annual sales tax holiday weekend.

Property taxes in Massachusetts are above the national average, with effective rates around 1.15%. Rates vary significantly by municipality, with some communities in the Greater Boston area having considerably higher rates. The state operates under Proposition 2 1/2, which limits annual property tax levy increases to 2.5%. Massachusetts also offers a circuit breaker tax credit for seniors whose property taxes exceed a percentage of their income.

Income Tax

Massachusetts has a flat 5% rate plus a 4% surtax on income over $1 million (effective 9% on income above $1M). Short-term capital gains are taxed at 8.5%.

Flat Tax Rate: 5.00%

Sales Tax

State Rate6.25%

Avg. Local Rate0.00%

Combined Rate6.25%

Property Tax

Effective Rate1.15%

Median Annual Bill$5,361

Key Deductions in Massachusetts

✓No-tax status for income below $8,000 (single)
✓Rent deduction (50% of rent paid, up to $4,000)
✓Commuter deduction for transit and parking expenses
✓Senior circuit breaker tax credit (property tax relief for 65+)
✓Dependent care deduction
✓Undergraduate student loan interest deduction

Filing Information

Filing Deadline: April 15

Tax Authority: Massachusetts Department of Revenue

Phone: (617) 887-6367

Website: https://www.mass.gov/orgs/massachusetts-department-of-revenue

Frequently Asked Questions

What is the Massachusetts millionaire tax?

Starting in 2023, Massachusetts imposes a 4% surtax on annual income exceeding $1 million, on top of the existing 5% flat rate. This means income above $1 million is taxed at 9%. The threshold is adjusted annually for inflation.

Is clothing taxed in Massachusetts?

Individual clothing items priced at $175 or less are exempt from sales tax in Massachusetts. The tax only applies to the amount above $175 on higher-priced items. This exemption does not apply to athletic or protective clothing.

Can renters get a tax break in Massachusetts?

Yes, Massachusetts allows a deduction of 50% of rent paid for your principal residence, up to $4,000. This is one of the more generous renter deductions among states and can significantly reduce your taxable income.

How does Proposition 2 1/2 work?

Proposition 2 1/2 limits annual property tax levy increases to 2.5% for each municipality in Massachusetts. It also caps the overall tax levy at 2.5% of total assessed property value. Communities can override these limits through voter-approved measures.

Neighboring State Guides

New Hampshire Vermont New York Connecticut Rhode Island

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