Tax in Massachusetts: a complete guide
Massachusetts is home to Boston Harbor, which was the site of the Boston Tea Party and possibly the home of the most famous tax protest of all time. If history serves as a warning, how do current Massachusetts taxes measure up?
Here are Massachusetts state taxes at a glance:
A flat state income tax rate of 5 percent – regardless of what you earn
A state sales tax of 6.25 percent
The lowest threshold for estate tax of any US state
Massachusetts income tax
Massachusetts has a flat statewide income tax rate of five percent. That means, unlike federal income tax, which is progressive, no matter what you earn, you will pay five percent income tax.
This is a low income tax rate for New England, with only New Hampshire matching Massachusetts’ five percent. The highest income tax rate in a neighboring state belongs to New York, where the top earners can pay up to 10.9 percent 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 payment. Taxpayers can also get a personal exemption to reduce their overall tax bill.
Massachusetts personal exemption amounts
|Filing status||Personal exemption amount|
|Head of household||$6,800|
|Married filing separate||$4,400|
|Married filing joint||$8,800|
Massachusetts capital gains tax
There are two rates for capital gains tax in Massachusetts.
Long-term capital gains are taxed at the standard five percent 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 percent.
Massachusetts sales tax
Massachusetts has no local sales taxes, so the sales tax rate is set at state level and applies to all municipalities. The state sales tax is 6.25 percent, 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 percent 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.|
Massachusetts property tax
Property taxes vary across different municipalities in Massachusetts. The average property tax rate in Massachusetts is 1.12 percent. 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.
Massachusetts retirement tax
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 percent.
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.
Massachusetts estate tax
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 percent of the portion of the estate's value over $1 million to 16 percent on the portion of an estate over $10,040,000.
Massachusetts motor tax
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.
The bottom line
That is almost everything you need to know about taxes in Massachusetts. But when it comes to taxes, the way they add up on your tax return can be more complicated than meets the eye.
A financial advisor can help you handle all your tax queries and ensure you’re not paying more tax than needed. Find your financial advisor with Unbiased.
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.