Massachusetts Income Tax: 5% Flat Rate, 4% Surtax & RSUs

Massachusetts income tax is a flat 5% on most income, including RSU vesting and capital gains, plus a 4% Fair Share surtax on taxable income above $1,083,150 (2025) — a combined 9% top rate. A large RSU vest or equity exit that crosses the surtax threshold gets that extra 4 points on the portion above it.

For most of its history Massachusetts had one of the simplest state tax systems in the country: a single flat rate. That's still mostly true — but the 2023 addition of a 4% surtax on high incomes changed the math for anyone with a big equity year. This guide covers the Massachusetts income tax rate, how it taxes each kind of equity comp, and exactly when that surtax kicks in.

Massachusetts Income Tax Rate (5% Plus a 4% Surtax)

Massachusetts taxes most personal income at a flat 5% rate (Massachusetts DOR). On top of that base rate, a 4% Fair Share surtax applies to taxable income above $1,083,150 for the 2025 tax year, bringing the top combined rate to 9% on income over the threshold (Massachusetts DOR — 4% Surtax).

Massachusetts describes the surtax this way:

"Massachusetts voters approved a constitutional amendment that imposes a 4% surtax on the portion of annual taxable income in excess of $1,000,000," indexed annually for inflation.

— Massachusetts DOR, 4% Surtax on Taxable Income

A few features make Massachusetts distinctive among flat-rate states:

• The surtax threshold is inflation-indexed, so it rises each year (it was $1,053,750 in 2024 and $1,107,750 in 2026).
• The same dollar threshold applies to all filing statuses — there's no doubling for married couples, which creates a marriage penalty at the top.
• Massachusetts has no standard deduction; instead it allows a personal exemption of $4,400 (single) or $8,800 (married filing jointly).

For where Massachusetts sits among the states, see our state income tax guide.

How Massachusetts Taxes RSUs

Massachusetts taxes RSU vesting as ordinary Part B income at the flat 5% rate, on the full fair market value at vest — the same amount included in your federal wages (IRS Publication 525). If your total taxable income for the year exceeds the surtax threshold, the portion above $1,083,150 is taxed at 9% instead.

The chart below shows the federal rate that stacks with the Massachusetts piece as income climbs.

The takeaway: for most vests, Massachusetts takes a clean 5% — a $150,000 vest carries roughly $7,500 of state tax. It's only when a vest pushes your total taxable income past the surtax line that the marginal state rate jumps to 9%.

Below the surtax threshold, the state piece scales linearly with the vest:

These figures assume your total taxable income stays under $1,083,150; any portion of income above that line is taxed at the 9% combined rate instead. As with any flat-base state, the Massachusetts tax is additive to your federal bill on the same income — not a substitute for it. For the vest-by-vest mechanics, see our Massachusetts RSU vesting tax breakdown and the general guide to how RSUs are taxed.

Massachusetts does not publish a separate federal-style flat supplemental rate. Employers withhold on supplemental wages like RSU vesting at the flat 5% Part B rate, escalating toward 9% on the portion that, combined with your other wages, exceeds the surtax threshold. For most employees below the threshold, the 5% withheld lines up closely with what's owed — there's no large state-level withholding gap of the kind the federal 22% supplemental rate creates.

The 4% Fair Share Surtax and Big Equity Events

The surtax is where equity holders need to pay attention, because a single large vesting event or exit can push you across the $1,083,150 line in one year — and everything above it is taxed an extra 4 points. This is the Massachusetts version of the "bunching" problem: concentrated equity income that lands in one year is exactly what trips the surtax.

A worked example: suppose your salary and normal vests put you at $900,000 of taxable income, and then a large IPO-related vest adds $400,000, taking you to $1.3 million. The portion above $1,083,150 — roughly $216,850 — is taxed at the extra 4%, about $8,674 in surtax on top of the 5% base. Spread that same equity income across two years and you might stay under the threshold both years, avoiding the surtax entirely.

Because the threshold is inflation-indexed and applies per return, the planning question is genuinely a multi-year one — the same logic as managing federal brackets, just with a sharp 4-point step at the Massachusetts line.

It's worth being precise about what counts toward the threshold: it's your Massachusetts taxable income, after the personal exemption, including wages, RSU vesting, most capital gains, and other income combined. So the surtax isn't triggered by the size of a single vest in isolation — it's triggered by your total taxable income for the year crossing the line. That means a moderate vest can still push a high base salary over the threshold, and conversely a large vest in an otherwise-low-income year might not cross it at all. The practical move is to forecast your full-year taxable income early, see how close you are to the line, and decide whether any discretionary equity events (an optional ISO exercise-and-sell, a planned share sale) should land this year or next.

How Massachusetts Income Tax Treats ISOs and Capital Gains

Massachusetts conforms to the federal treatment of incentive stock options, so a qualifying ISO exercise creates no Massachusetts ordinary income at exercise. Importantly, Massachusetts has no separate state alternative minimum tax, so an ISO exercise-and-hold does not trigger a state AMT — the AMT exposure is purely federal. That makes the ISO exercise decision for a Massachusetts resident a federal optimization, the same as it is in Illinois.

On capital gains, RSU vesting income is taxed as ordinary Part B income at 5% (9% above the surtax), and most long-term capital gains are likewise taxed at the 5% Part B rate (plus the surtax above the threshold). Note that Massachusetts taxes certain short-term capital gains at a higher 8.5% rate, a quirk that applies to assets held a year or less — so the holding period affects your state rate, not just the federal one.

That short-term rate is a genuine reason to mind your holding period in Massachusetts specifically. Selling RSU or ISO shares within a year of acquisition can land the gain at 8.5% at the state level, versus 5% if you hold past the one-year mark — a 3.5-point state premium layered on top of the federal short-term-vs-long-term difference. For a tech employee selling appreciated shares, that combined federal-and-state holding-period effect can be substantial, and it's unusual among states (most, like Illinois, apply one flat rate regardless of holding period).

On deductions, remember Massachusetts gives no standard deduction — just the personal exemption of $4,400 (single) or $8,800 (married filing jointly). For an equity-heavy return, that exemption is small relative to the income at stake, so effectively almost all of your vest value is exposed to the 5% (or 9%) rate.

The chart places Massachusetts among the major states. At a 5% base rising to 9%, Massachusetts sits below California's 13.3% top rate for most earners but can approach high-tax territory once the surtax applies. The lack of a standard deduction also means slightly more of your income is exposed than in states with generous deductions. For the broader AMT mechanics that still apply federally, see our alternative minimum tax guide and how it maps to your effective rate.

Massachusetts Residency and Relocation

Massachusetts taxes residents on all income and nonresidents on Massachusetts-source income. If you move into or out of the state mid-year while holding equity, your RSU and option income is generally allocated based on where you performed the work during the vesting period — the standard work-day allocation that applies across states, covered in our guide to moving states mid-year with equity. The surtax adds a wrinkle here: because it applies to your Massachusetts taxable income, a part-year resident's surtax exposure depends on how much income is sourced to Massachusetts, not just total income. Keep records of your move date and work-day split so a part-year or nonresident allocation can be done cleanly.

Planning Notes for Massachusetts Tech Employees

Massachusetts planning centers on the surtax threshold and federal coordination:

• Track your proximity to $1,083,150 in any year with a large vest or exit; crossing it adds 4 points on the excess.
• Consider staging large equity events across years to stay under the threshold where you have timing flexibility, the same way you'd manage equity taxes across multiple years.
• Treat ISO timing as federal — Massachusetts adds no state AMT, so the exercise decision is a federal one.
• Budget 5% (or 9% above the threshold) of each vest for state tax, and confirm your withholding covers it.
• Mind the holding period on share sales — Massachusetts taxes short-term gains at 8.5% versus 5% long-term, so holding past a year saves at the state level too.

The single biggest Massachusetts-specific risk is sleepwalking across the surtax threshold in a liquidity year. Everything else — the flat 5% base, the small exemption, federal-only AMT — is straightforward to budget for. The surtax is the one place where a little forecasting and, where possible, timing can save real money, so it deserves a dedicated look any year you expect total taxable income near or above seven figures.

Frequently Asked Questions

What is the Massachusetts income tax rate? A flat 5% on most income, plus a 4% Fair Share surtax on taxable income above $1,083,150 (2025), for a 9% top rate on the portion above the threshold.

Does Massachusetts have a millionaire tax? Yes. The 4% Fair Share surtax applies to taxable income above the inflation-indexed threshold (about $1.08 million in 2025), which is often called the millionaire tax.

Does Massachusetts tax RSUs? Yes, RSU vesting is taxed as ordinary Part B income at 5% on the full vest value, rising to 9% on any portion above the surtax threshold.

Does Massachusetts have a state AMT? No. Massachusetts has no separate state alternative minimum tax; an ISO exercise-and-hold creates only a federal AMT preference.