What Taxes Do You Pay in Massachusetts?

Massachusetts residents are subject to a variety of taxes that fund public services and infrastructure. These taxes include income tax, sales tax, property tax, estate tax, and other specific excise taxes. Understanding these taxes is essential for both individuals and businesses to manage their finances effectively.

Income Tax

Massachusetts imposes a flat income tax rate of 5% on most types of income, including wages, salaries, and income from investments such as dividends and interest. For long-term capital gains (profits from assets held for more than one year), the state applies the same 5% tax rate. However, short-term capital gains (profits from assets held for less than a year) are taxed at a higher rate of 12%. This tax structure is relatively simple, but it’s important for residents to plan accordingly when dealing with investment income.

Sales Tax

Massachusetts charges a 6.25% sales tax on most goods and some services. This tax applies to items such as electronics, furniture, and vehicles. However, there are notable exemptions. Essential items, such as groceries and prescription medications, are exempt from sales tax. Clothing purchases under $175 are also exempt, making Massachusetts a relatively tax-friendly state for consumers buying essential goods. 

Property Tax

Property taxes in Massachusetts are determined at the local level and vary by town and city. Local governments set property tax rates, and the tax is based on the assessed value of your property. On average, property taxes in Massachusetts tend to be higher than in many other states, so homeowners should be prepared for significant annual costs. It’s important to check with your local assessor’s office for specific rates and potential exemptions for seniors or veterans, which may reduce property tax burdens.

Estate Tax

Massachusetts imposes an estate tax on estates worth over $2 million. The estate tax applies to the total value of the estate, not just the amount exceeding the exemption threshold. The tax rate ranges from 0.8% to 16%, depending on the estate’s value. Planning for estate taxes is crucial for high-net-worth individuals and families who wish to pass on assets without a significant tax burden.

Other Taxes

In addition to the main taxes, Massachusetts has excise taxes on vehicles, cigarettes, and alcohol, along with a 0.75% local meals tax applied to restaurant dining. The state also imposes a 24-cent-per-gallon gasoline tax to fund transportation projects.

Conclusion

Massachusetts residents pay a variety of taxes, including income, sales, property, and estate taxes. While the state offers exemptions for certain goods and services, taxes can still be substantial. It's important for individuals to be aware of these tax laws to manage their financial obligations effectively.