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Taxes in Massachusetts

This article is not intended to provide tax, legal, or investment advice. This material has been prepared for informational purposes only, and should not be relied upon for tax, legal, or investment purposes. These topics are complex and constantly changing. The information presented here may be incomplete or out of date. Be sure to consult a relevant professional.

Every state has different tax rates, and some of them are higher than in other states. In Massachusetts, the most significant taxes are income and sales taxes. Both of these taxes consist of a flat rate paid by residents statewide.

The income rate is 5.00%, and then the sales tax rate is 6.25%. Sales rate is in the top-20 lowest in the U.S. compared to other states. The estate rate tax depends on the size of the estate. More details on estate taxes in Massachusetts are described further in the article.

Massachusetts State Tax Key Takeaways:

  • State income tax: 5.00% flat rate.
  • Property tax: 1.17% average effective rate.
  • Sales tax: 6.25% rate.
  • Gas tax: 24 cents per gallon of regular diesel & gasoline.

Income Tax Massachusetts

Federal rates have different brackets depending on the income size. That’s not the case with the Massachusetts state rate, and it’s 5.00% flat regardless of income. M.A. taxpayers can pay more if they want to contribute to the state’s well-being.

Massachusetts has no standard deductions to claim, but the state allows some typical federal itemized deductions and additional credits. Residents can deduct expenses on child care, college tuition (when it exceeds 25% of Massachusetts adjusted gross income), rental payments (50% of the rent and only up to $3,000), specific computer costs, student loan interest payments.

Massachusetts state residents may also claim personal exemptions to reduce taxable income. Take a look at the table of exemptions in Massachusetts.

Filing Status, Massachusetts  Exemption, $
Single 4,400
Household Head 6,800
Married, but filing separately 4,400
Married and filing jointly 8,800

Massachusetts residents may be penalized when not having health insurance coverage. Taxpayers in Massachusetts may pay for insurance through their tax returns.

If the taxpayer in Massachusetts doesn’t cover their healthcare insurance during the three-month grace period, they get the first penalty. Penalties in Massachusetts keep accumulating up to $119 per month. The total amount of penalties to pay depends on the taxpayer’s income.

Massachusetts Capital Gains Tax

There are two tax rates applied to capital gains in Massachusetts:

  • long-term capital gains rate: 5.00%;
  • short-term capital gains (less than a year): 12%.

Long-term capital gains also include interest and dividend income. If the long-term gain is generated on the collectibles sales, it is also taxed at a rate of 12%.

Massachusetts Sales Tax

Massachusetts has a sales rate of 6.25%. The state has no additional local taxes to pay, so you have to pay 6.25% on sales no matter your location in Massachusetts. The tax is also applied to the purchase or usage of “tangible personal property,” which includes most purchasable goods, excluding several exceptions.

Food sold in stores isn’t taxed (with several exceptions). Clothing, shoes, jackets, and costumes are exempt from taxes, but only if their cost is up to $175. Products with a price higher than $175 are taxable above that amount. Here’s an example, jeans with a price tag of $190 should be taxed at 6.25% on the $15 above the exemption limit.

Other sales exemptions in Massachusetts include:

  • admissions tickets, such as movies or sports tickets;
  • newspapers;
  • professional and personal services;
  • most health care products.

Massachusetts Property Tax

The local government considers property taxes as the biggest income source. In some counties, residents pay an average property tax that exceeds $4,000 per year. In MA, the average effective property tax rate is 1.17%.

Massachusetts Estate Tax

Residents who own estate above the amount of $1 million must also pay the Massachusetts estate tax. Residents must file a tax return if their property’s gross value (before deductions and credits) is over $1 million on the estate.

Take a look at the Massachusetts estate tax rates table below.

Taxable estate, $ Marginal rate, %
0 – 40,000 0.00
40,000 – 90,000 0.80
90,000 – 140,000 1.60
140,000 – 240,000 2.40
240,000 – 440,000 3.20
440,000 – 640,000 4.00
640,000 – 840,000 4.80
840,000 – 1,040,000 5.60
1,040,000 – 1,540,000 6.40
1,540,000 – 2,040,000 7.20
2,040,000 – 2,540,000 8.00
2,540,000 – 3,040,000 8.80
3,040,000 – 3,540,000 9.60
3,540,000 – 4,040,000 10.40
4,040,000 – 5,040,000 11.20
5,040,000 – 6,040,000 12.00
6,040,000 – 7,040,000 12.80
7,040,000 – 8,040,000 13.60
8,040,000 – 9,040,000 14.40
9,040,000 – 10,040,000 15.20
10,040,000+ 16.00

Check this table if you own estate. In some cases, claiming credits and deductions may even decrease the overall estate price, so make use of this legal option.

Massachusetts Cigarette Tax

Massachusetts implements one of the highest cigarette taxes in the United States. Its rate is $3.51 per pack of 20. As a result, a pack of cigarettes costs around $10.00.

Massachusetts Alcohol Tax

Contrary to the cigarette tax rate, Massachusetts alcohol rates are some of the lowest in the U.S. These are the rates:

  • 11 cents per gallon of beer;
  • 55 cents per gallon of wine;
  • $4.05 per gallon of liquor.

Massachusetts Gas Tax

Gasoline and diesel are taxed identically in Massachusetts. A gallon of each goes at 24 cents in taxes.

Calculating Taxes: Useful Tips

Whether you are a business owner or a regular taxpayer, it’s critical to manage your finances and prepare for the tax year. Instead of waiting till the end of the year to begin tax preparation, consider developing a plan to make it easier to file taxes. Here are some tips to prepare:

  • If you are a salaried employee, make sure to fill out the W-4 form properly. It affects the withholdings that an employer must deduct from the paycheck. The form also includes deductions and credits taxpayers can claim to reduce taxable income.
  • Business owners should keep their books properly. Keep all receipts to deduct business expenses and credits at the end of the year.
  • Make sure to use all possible deductions and credits. Every person has the right to deduct expenses and credits to reduce their taxable income. Find out about claimable deductions and credits to avoid overpaying.
  • Consult a financial advisor. This tip is useful for both business owners and regular taxpayers.

If you have trouble filing for taxes, consider contacting an accountant or advisor.

Risks And Penalties For Not Paying Taxes In Massachusetts

Massachusetts residents should file their federal and state income tax returns on time to avoid penalties. If a resident is filing late and is getting a tax reimbursement, they won’t be penalized if they file within three years of the deadline.

When filing for an extension, Massachusetts residents have three years from the date of this extension. If a resident fails to file within three years, their unclaimed refunds become the property of the U.S. Treasury.

If a resident owes taxes and fails to file before the deadline, the IRS might penalize this taxpayer. Typically, the penalty is 5 percent of the unpaid taxes for each month. The penalty could go up to 25 percent of taxpayers’ unpaid taxes. That penalty starts accumulating the day after the tax filing due date.

Claiming credits and deductions, filing and paying taxes is a difficult task for regular taxpayers. The task is even more challenging for business owners. As this article reveals, taxpayers must pay federal, state, and even local taxes. There is a way to avoid penalties and stress — by contacting certified accountants.

Professional Accounting In Massachusetts

As mentioned, taxpayers may get into trouble for not paying taxes on their income in Massachusetts. That’s why you should consider contacting a professional CPA or an accounting company in Massachusetts.

The CPA or an accounting company offers its aid to small businesses and individual taxpayers in Massachusetts. Companies in Massachusetts can get a dedicated bookkeeper or accountant when contacting accounting companies. Individual taxpayers in Massachusetts help with income, estate and sales taxes, and claiming credits and deductions.

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