What Is the Massachusetts Income Tax Rate for 2025?
Massachusetts taxpayers can expect a stable state income tax structure in 2025. The state follows a flat tax system, meaning most residents pay the same percentage of their taxable income in state taxes. However, high earners should be aware of an additional surtax on income exceeding $1 million.
Massachusetts Income Tax Rates for 2025
Standard Income Tax Rate: 5%
Millionaire’s Tax (Surtax): An additional 4% applies to income over $1 million
This surtax, also known as the “Fair Share Amendment,” was approved by voters in 2022 and took effect in 2023. It increases the tax burden on high-income earners, impacting business owners, investors, and retirees who receive large capital gains.
Who Is Affected by the 4% Surtax?
The additional 4% tax applies only to taxable income exceeding $1 million. For example:
If your taxable income is $900,000, you pay only the standard 5% tax.
If your taxable income is $1.2 million, you pay 5% on the first $1 million and 9% (5% + 4%) on the remaining $200,000.
This surtax is particularly significant for individuals with fluctuating income, such as those selling real estate or businesses.
Tax Planning Considerations
While Massachusetts’ income tax rates are set, strategic tax planning can help individuals minimize their overall tax burden. Consider:
Income Deferral or Splitting: Spreading income across multiple years or family members to stay below the $1 million threshold.
Maximizing Deductions and Credits: Contributions to retirement accounts or charitable donations may help reduce taxable income.
Capital Gains Strategies: Proper timing of asset sales can impact whether income falls under the surtax threshold.
Final Thoughts
The Massachusetts income tax rate remains at 5% for most taxpayers, but the 4% surtax on income over $1 million adds complexity for high earners. Whether you're an employee, investor, or business owner, understanding these tax rules and planning accordingly can help you minimize your tax liability in 2025 and beyond.
