--- title: "Massachusetts Income Tax: 5% Flat Rate, 4% Surtax & RSUs" slug: massachusetts-income-tax publishedAt: 2026-06-24T12:38:48.000Z updatedAt: 2026-06-25T06:50:34.811Z author: "Mike Navarro" authorSlug: mike-navarro category: "State Tax" tags: ["Massachusetts", "State Tax", "RSU", "ISO", "Equity Compensation", "Surtax"] excerpt: "Massachusetts taxes most income at a flat 5%, plus a 4% Fair Share surtax above $1,083,150 — a 9% top rate. Here's how that hits RSU vesting, ISO gains, and capital gains, and how a big equity event can cross the surtax line." canonical: https://myequitytax.com/blog/massachusetts-income-tax --- 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](https://www.mass.gov/topics/personal-income-tax)). 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](https://www.mass.gov/info-details/massachusetts-4-surtax-on-taxable-income)). 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](https://www.mass.gov/info-details/massachusetts-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](/blog/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](https://www.irs.gov/publications/p525)). 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: | RSU vest value | Massachusetts tax at 5% | |---|---| | $50,000 | $2,500 | | $100,000 | $5,000 | | $150,000 | $7,500 | | $300,000 | $15,000 | 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](/blog/ma-rsu-vesting-tax) and the general guide to [how RSUs are taxed](/blog/how-are-rsus-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. **Watch the threshold in a liquidity year.** Because the surtax threshold doesn't double for married couples and isn't prorated for a one-time spike, an IPO, a big double-trigger settlement, or a large ISO sale can cross it in a single return. If you have flexibility on timing, staging income across years is the main lever to manage it. 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](/blog/california-income-tax) 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](/blog/alternative-minimum-tax) guide and how it maps to [your effective rate](/blog/rsu-tax-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](/blog/moved-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](/blog/optimize-equity-taxes-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.