Financial planning in Massachusetts
A flat 5% with a 4% surtax above $1.1 million, and an estate tax from $2 million.
Direct answer
Massachusetts taxes most income at a flat 5%, adds a 4% surtax on taxable income above $1,107,750 in 2026, and taxes short-term capital gains at 8.5%. Social Security is exempt and government pensions are exempt, but private pensions and IRA and 401(k) withdrawals are taxed. Its estate tax starts at $2 million, one of the lowest thresholds in the country, and does not recognise federal portability. For a Boston household the surtax threshold and the $2 million estate line are the numbers the plan is built around.
Massachusetts tax treatment
Figures are for tax year 2026, each read from the source beside it. Thresholds and rates are revised regularly; confirm the current year before acting on any of them. What these rules change in a household’s plan, from the order accounts are drawn to the timing of Roth conversions, is set out in the retirement tax planning overview.
Most income is taxed at 5%. Taxable income above $1,083,150 in 2025 and $1,107,750 in 2026 carries an additional 4% surtax, and the threshold rises with inflation each year. Short-term capital gains and gains on collectibles are taxed at 8.5%; long-term gains at 5%.
Social Security is not included in Massachusetts income. Contributory pensions from the U.S. government and from Massachusetts and its subdivisions are exempt, but income from private pensions and from IRA and 401(k) withdrawals is taxable.
For deaths on or after January 1, 2023 the tax applies to estates over $2,000,000, with a credit of up to $99,600 that eliminates it at or below that level. The tax is computed under the Internal Revenue Code as it stood on December 31, 2000, so later federal changes — including portability between spouses — do not apply.
Worth doing here
Things that are worth doing in Massachusetts that would not be worth doing, or would work differently, somewhere else.
Because the 4% surtax applies to all income above roughly $1.1 million in a single year, a large sale, vesting or Roth conversion spread across two tax years can avoid it entirely. The threshold is indexed, so the arithmetic is redone each year.
With short-term gains taxed at 8.5% and long-term gains at 5%, the one-year holding line is worth 3.5 points of state tax, before the surtax. Diversifying vested equity is planned around it.
Contributions to Massachusetts's own 529 plan or prepaid tuition program can be deducted up to $1,000 a year, or $2,000 on a joint return.
Federal and state, together
At 5% — 9% above the surtax threshold — Massachusetts income tax plus Greater Boston property tax exceeds the federal deduction cap for many households, and above $500,000 of modified adjusted gross income the cap shrinks toward $10,000.
The federal deduction for state and local taxes is $40,400 for tax year 2026 and begins to shrink above $500,000 of modified adjusted gross income, down to a floor of $10,000, and is scheduled to return to $10,000 after 2029. The federal estate tax exclusion is $15,000,000 per person for deaths in 2026. IRS, Instructions for Schedule A (2025), line 5e; IRS, tax year 2026 inflation adjustments (Rev. Proc. 2025-32).
Cities
Each city page covers what is local — how households there tend to be paid, what the first meeting usually covers — and inherits this state layer.
Greater Boston's households are concentrated in biotechnology and pharmaceuticals, the academic medical centres and universities, and asset management — three sectors that pay very differently.
Watch and learn
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Common questions
Social Security is exempt, as are contributory pensions from the federal government and from Massachusetts and its subdivisions. Private pensions and IRA and 401(k) withdrawals are taxed at 5%.
An additional 4% on taxable income above a threshold that rises with inflation: $1,083,150 for 2025 and $1,107,750 for 2026.
Yes, on estates over $2 million for deaths on or after January 1, 2023, with a credit of up to $99,600. Massachusetts does not recognise federal portability between spouses.
No. Flames Financial Planning is based in Minnetonka, Minnesota, and serves Massachusetts households through a virtual planning relationship. This page describes the service area and does not claim a Massachusetts office.
Yes. State tax treatment shapes withdrawal order, Roth-conversion timing, and where investments are best held. Planning includes tax guidance and review of a completed return; Premier adds tax projections and preparation and filing through an independent tax partner.
Next step
A discovery meeting covers your situation, what you pay now, and whether a fixed quarterly membership is a better fit.
