State & Local Taxes
Massachusetts State Income Tax: 2026 Rates and the Millionaire Surtax
The Massachusetts state income tax is a 5% flat rate on most income in 2026, plus a 4% surtax on the portion of taxable income above $1,107,750. That combination produces a top marginal rate of 9% on high earners, while short-term capital gains carry their own 8.5% rate. Massachusetts does not use graduated brackets the way most states do, so the mechanics differ from a typical state return.
This guide covers the 5% rate, the millionaire surtax and its indexed 2026 threshold, the 8.5% short-term capital gains rate, and how residency determines what income the state can tax.
What is the Massachusetts state income tax rate in 2026?
Massachusetts taxes most personal income at a flat 5% in 2026. That single rate applies to wages, self-employment income, interest, dividends, long-term capital gains, pension distributions, and rental income for the vast majority of filers. Unlike states with graduated brackets, the rate does not step up as ordinary income rises, until the separate 4% surtax begins.
The 5% rate has been stable for years and reflects a constitutional requirement that income be taxed at a uniform rate. The surtax approved by voters in 2022 is the one carve-out from that uniformity.
Interest and dividends are taxed at the same 5% as wages. This is a change from earlier decades, when Massachusetts taxed most interest and dividends at 12%. That higher rate now applies mainly to gains on collectibles.
The 4% millionaire surtax and the 2026 threshold
Massachusetts adds a 4% surtax to the portion of taxable income that exceeds $1,107,750 in tax year 2026. Only the excess is taxed at the higher rate. Income up to the threshold stays at 5%, and the dollars above it are taxed at 9% combined (the 5% base plus the 4% surtax). The surtax does not apply to your entire income.
Voters approved the surtax through the Fair Share Amendment in November 2022, and it took effect January 1, 2023. It is commonly called the “millionaire tax.” The starting threshold was $1,000,000 for tax year 2023.
The threshold is indexed for inflation and rises most years. The Massachusetts Department of Revenue announces the figure annually.
| Tax year | Surtax threshold | Rate on income above threshold |
|---|---|---|
| 2023 | $1,000,000 | 9% (5% base + 4% surtax) |
| 2025 | $1,083,150 | 9% (5% base + 4% surtax) |
| 2026 | $1,107,750 | 9% (5% base + 4% surtax) |
Worked example: a resident with $1,300,000 of taxable income in 2026 pays 5% on the first $1,107,750 (about $55,388) and 9% on the remaining $192,250. The 4% surtax on that excess adds roughly $7,690 on top of the base 5%.
The surtax can catch people who are not “millionaires” in a normal year. A one-time event, such as selling a business, a home with large appreciation, or a concentrated stock position, can push a single year’s taxable income over the threshold even if wages are modest. Filers in that situation may want to plan the timing of a sale, though whether that helps depends on the specifics of the transaction.
Married couples generally cannot sidestep the surtax by filing separately. For tax years beginning in 2024 and later, Massachusetts requires spouses who file a joint federal return to file jointly in Massachusetts, which prevents splitting income across two returns to stay under the threshold. Rules can change, so confirm current filing requirements for your year.
Capital gains: the 8.5% short-term rate
Massachusetts taxes short-term capital gains at 8.5% and long-term capital gains at the flat 5%. A short-term gain is generally a gain on an asset held one year or less. This split means the holding period, not just the size of the gain, can materially change the state tax bill.
Long-term gains are taxed like ordinary income at 5%, with one notable exception: gains on collectibles are taxed at 12%. Federal capital gains rules and holding periods largely define what counts as short-term versus long-term for Massachusetts purposes.
The surtax stacks on top of these rates. A large capital gain that pushes taxable income over $1,107,750 in 2026 exposes the excess to the extra 4%. So a very large short-term gain could face 8.5% plus 4% on the portion above the threshold, and a large long-term gain could face 5% plus 4% on that portion.
| Income type | 2026 rate | With surtax on amount over $1,107,750 |
|---|---|---|
| Wages, most ordinary income | 5% | 9% |
| Short-term capital gains | 8.5% | 12.5% |
| Long-term capital gains | 5% | 9% |
| Interest and dividends | 5% | 9% |
| Collectibles gains | 12% | 16% |
Residency: who owes Massachusetts income tax
Massachusetts taxes full-year residents on all income from any source, and taxes nonresidents only on income sourced to Massachusetts, such as wages earned in the state. Part-year residents are taxed on all income during the period they were residents plus Massachusetts-source income during the rest of the year. Residency, not just where a paycheck is issued, drives the scope of what the state can reach.
You can be treated as a Massachusetts resident under two tests. The first is domicile: the place you treat as your permanent home. The second is statutory residency, which can apply if you maintain a permanent place of abode in Massachusetts and spend more than 183 days of the year in the state, even if your domicile is elsewhere.
Leaving Massachusetts to avoid the surtax is possible in principle but not automatic. The state can scrutinize a claimed change of domicile, and factors like where you keep your home, family, and business ties may matter. Anyone planning a move partly for tax reasons should document the change carefully and confirm treatment with an advisor, because outcomes vary by situation.
Massachusetts also gives favorable treatment to some retirement income. Social Security benefits are exempt from state income tax, and public pensions (such as state, municipal, teacher, and federal) are generally exempt. Distributions from private 401(k), 403(b), and IRA accounts are typically taxed at the standard 5%.
How Massachusetts compares to other states
Massachusetts sits between the no-tax states and the high graduated-rate states. Its 5% base is moderate, but the 4% surtax gives it a 9% top rate that rivals higher-tax jurisdictions for very high earners. States like Florida, Texas, and New Hampshire (on earned income) impose no broad personal income tax at all, which is one reason some high earners consider relocating.
Compared with a graduated system, the Massachusetts structure is simpler for most filers: one rate up to the threshold. For those above it, the planning questions center on the surtax and on the short-term versus long-term capital gains distinction rather than on climbing through many brackets. The right comparison depends on your income mix and where the alternative state would tax you.
Frequently asked questions
What is the Massachusetts income tax rate for 2026?
Massachusetts taxes most personal income at a flat 5% in 2026. A 4% surtax applies to taxable income above $1,107,750, producing a 9% top rate on the portion over that threshold. Short-term capital gains are taxed at 8.5%, and long-term capital gains at 5%. Collectibles gains are taxed at 12%.
How does the Massachusetts millionaire surtax work?
The surtax adds 4% only to taxable income above the annual threshold, which is $1,107,750 for 2026. Income up to the threshold stays at 5%, and dollars above it are taxed at 9% combined. The threshold is indexed for inflation and was $1,083,150 in 2025 and $1,000,000 when the surtax began in 2023.
Do I pay the surtax on a one-time gain like selling my home or business?
Possibly. The surtax applies to total taxable income above the threshold, so a large one-time capital gain can push a single year over $1,107,750 even without high wages. Only the excess is taxed at the extra 4%. Timing or structuring the sale may help in some cases, depending on the transaction and your other income.
Are capital gains taxed differently in Massachusetts?
Yes. Short-term capital gains (assets held one year or less) are taxed at 8.5%, higher than the 5% ordinary rate. Long-term capital gains are taxed at 5%, and collectibles at 12%. The 4% surtax can stack on top of any of these once total taxable income exceeds the annual threshold.
Does Massachusetts tax retirement income and Social Security?
Social Security benefits are exempt from Massachusetts income tax, and most public pensions (state, municipal, teacher, and federal) are generally exempt as well. Distributions from private 401(k), 403(b), and IRA accounts are typically taxed at the standard 5% rate. Treatment can vary by the source and type of plan.
Can married couples avoid the surtax by filing separately?
Generally no. For tax years beginning in 2024 and later, Massachusetts requires spouses who file a joint federal return to file jointly in Massachusetts. That rule prevents couples from splitting income across two returns to stay below the surtax threshold. Filing requirements can change, so confirm the rule for your tax year.
Who has to file a Massachusetts income tax return?
Full-year residents are taxed on all income and generally must file if income exceeds the filing threshold. Nonresidents file on Massachusetts-source income, such as wages earned in the state. You can be a resident by domicile or by statutory residency, which may apply if you keep a home in Massachusetts and spend more than 183 days there in a year.
Reviewed by The Ledgerism Editorial Team. Last reviewed: July 2026.
Related reading: California state income tax rates and brackets, New York state income tax, states with no income tax, state vs federal income tax differences, and marginal vs effective tax rate.