Tax in Massachusetts: a complete guide
This guide takes you through what you need to know about state taxes in Massachusetts, including state income tax, sales tax, and retirement taxes.
Summary
Massachusetts has a flat state income tax rate of 5% – regardless of what you earn.
The state also charges a sales tax of 6.25%.
Massachusetts has one of the lowest thresholds for estate tax of any US state.
A financial advisor can review your income sources and develop a unique tax strategy just for you.
How much is income tax in Massachusetts?
Massachusetts has a flat statewide income tax rate of 5%. That means, unlike federal income tax, which is progressive, no matter what you earn, you will pay a 5% income tax.
This is a low income tax rate for New England, with only New Hampshire matching Massachusetts’ 5%. The highest income tax rate in a neighboring state belongs to New York, where the top earners can pay up to 10.9% income tax.
There are no tax brackets, but residents are welcome to pay higher income tax if they’d like. Perhaps unsurprisingly, this isn’t a popular option.
Taxpayers are also entitled to deductions, such as childcare expenses, college tuition, and rental payments. Taxpayers can also get a personal exemption to reduce their overall tax bill.
How much is the personal exemption in Massachusetts?
| Filing status | Personal exemption amount |
|---|---|
| Single | $4,400 |
| Head of household | $6,800 |
| Married filing separate | $4,400 |
| Married filing joint | $8,800 |
What is the capital gains tax in Massachusetts?
There are two rates for capital gains tax in Massachusetts.
According to the Massachusetts government, long-term capital gains are taxed at the standard 5% state income tax rate and are classed as income tax by the state.
However, short-term capital gains (in this context, this means gains made in less than 12 months) are taxed at 12%.
Collectives have a different tax rate and are charged at 12%.
On top of these state taxes, you will also have to pay federal capital gains tax. These are also broken into short- and long-term rates.
What is sales tax in Massachusetts?
Massachusetts has no local sales taxes, so the sales tax rate is set at the state level and applies to all municipalities.
The state sales tax is 6.25%, but some items are exempt.
Exempt items include most food sold in grocery stores. Newspapers, admission to cultural and sporting events, and most healthcare products are also exempt. Clothing items are exempt from sales tax up to $175. So that means if you bought an item of clothing costing $250, you’d have to pay a sales tax of 6.25% on the $75 over the threshold.
Like many other states, there are additional excise duties on tobacco and alcohol. Massachusetts offers some of the lowest taxes on alcohol in the country but higher than average taxes on cigarettes.
| Massachusetts wine tax | $0.55 per gallon | Wine vendors are responsible for paying a state excise tax of $0.55 per gallon, plus Federal excise taxes, for all wine sold in Massachusetts. |
|---|---|---|
| Massachusetts beer tax | $0.11 per gallon | Beer vendors are responsible for paying a state excise tax of $0.11 per gallon, plus Federal excise taxes, for all beer sold in Massachusetts. |
| Massachusetts liquor tax | $4.05 per gallon | Liquor vendors are responsible for paying a state excise tax of $4.05 per gallon, plus Federal excise taxes, for all liquor sold in Massachusetts. |
| Massachusetts cigarette tax | $3.51 per pack of 20 | These are some of the highest cigarette taxes in the country, making the cost of an average pack of cigarettes around $10. |
When is tax-free weekend in Massachusetts?
The dates for Massachusetts sales tax holiday are set each year no later than July 1.
In 2023, Massachusetts tax-free weekend was held on Saturday, August 12 and Sunday, August 13. In 2024, it’s predicted tax-free weekend will take place on Augst 10 and 11.
During this weekend, all eligible retail items, those priced at $2,500 or below, bought for personal use will qualify for no sales tax.
Meals, motor vehicles, or alcohol will not qualify for sales tax holiday exemption.
All businesses, including those who sell online, are mandated to participate in Massachusetts' tax-free weekend.
How much is property tax in Massachusetts?
Property taxes vary across different municipalities in Massachusetts. The average property tax rate in Massachusetts is 1.12%. The market value of a property also determines property tax, so it can differ greatly across different neighborhoods and properties.
That being said, Massachusetts is home to some of the most expensive properties in the country. Massachusetts’ median home value is $480,600, almost double the national median. Although property is cheaper in the west of the state, the desirable Cape Cod has one of the most expensive housing markets in the US, with house prices to match.
How much is motor tax in Massachusetts?
Unlike other states, fuel duty in Massachusetts is the same for regular gas and diesel. Both gasoline and diesel are taxed at $0.24 per gallon.
What is retirement tax in Massachusetts?
You only need to see some of Massachusetts’ stunning scenery once to understand why many may choose the state for their retirement. But does Massachusetts offer retirees any incentive in terms of retirement tax rates?
Massachusetts is fairly average for retirement tax rates.
Social Security retirement benefits are fully exempt, but any other retirement income, for example, payments from a retirement savings plan, is taxed at the state income tax rate of five%.
Some seniors might be entitled to the Real Estate Tax Credit for Persons 65 and Older, also known as the Circuit Breaker Credit.
Eligible candidates can get a refund on property taxes up to $1,200. However, to qualify for the Circuit Breaker Credit, the claimant must be over 65, own or rent their home and live in it and have an income of less than $64,000 as a single filing (or $80,000 as a head of household, and $96,000 if filing jointly). Finally, the value of the home must be less than $912,000.
How much is estate tax in Massachusetts?
An estate tax is applied to any estate valued at more than $1 million in Massachusetts.
This is the lowest threshold for estate tax in the entire US.
The estate tax rate varies from 0.8% of the portion of the estate's value over $1 million to 16% on the portion of an estate over $10,040,000.
Get expert tax advice
If you want help developing tax strategies to keep more of your hard-earned income, a financial advisor can help.
They will work with you to create a tax plan and help you reduce your tax burden.
Find a financial advisor with Unbiased. Answer a few questions, and we’ll match you with an advisor perfectly suited to meet your needs.
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Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.