The Massachusetts millionaires tax is an additional 4% state income tax on the portion of annual taxable income above an inflation-adjusted threshold, which is $1,083,150 for tax year 2025.{1Massachusetts Department of Revenue. Massachusetts 4% Surtax on Taxable Income} Officially called the Fair Share Amendment, it took effect for tax year 2023 after voters approved it as a constitutional amendment in November 2022. It stacks on top of the state’s flat 5% income tax, so every dollar above the threshold is taxed at a combined 9%.
How the Rate and Threshold Work
The surtax is marginal, not a cliff. If your Massachusetts taxable income is $1.2 million, you pay the standard 5% on the first portion up to the threshold and 9% only on the amount above it. Someone earning $1,000,001 owes roughly four extra cents. The common fear that crossing the line triggers a huge new bill on everything you earn is wrong.
The $1 million base is adjusted each year for inflation using the same method as federal income tax brackets.{2General Court of Massachusetts. Massachusetts Constitution} For 2025 the threshold is $1,083,150; the Department of Revenue publishes the updated figure on its surtax page before each filing season, so check there for the current year.{1Massachusetts Department of Revenue. Massachusetts 4% Surtax on Taxable Income}
What Income Counts Toward the Threshold
Massachusetts adds together three categories of state taxable income to decide whether you’re over the line:{1Massachusetts Department of Revenue. Massachusetts 4% Surtax on Taxable Income}
- Part A: short-term capital gains, long-term gains on collectibles, and interest and dividends (excluding Massachusetts bank interest).
- Part B: everything else, including wages, salaries, and business income.
- Part C: long-term capital gains.
If any part is negative for the year, it’s treated as zero for this calculation. You cannot use losses in Part B to offset gains in Part C for surtax purposes, except where Massachusetts law already allows that offset when computing each part separately.{1Massachusetts Department of Revenue. Massachusetts 4% Surtax on Taxable Income} A taxpayer with large capital gains and large business losses may expect those to wash out and find they don’t.
Income from partnerships, S corporations, and LLCs taxed as pass-throughs flows to the owner’s personal return and counts toward the threshold like any other income. Massachusetts offers an elective pass-through entity (PTE) excise that lets qualifying entities pay at the entity level, with members receiving a credit equal to 90% of their share of the excise paid.{3Massachusetts Department of Revenue. Elective Pass-through Entity Excise} The PTE excise rate is 5% and does not include the 4% surtax, so business owners cannot use it to fully offset the surtax on income above the threshold.
One-Time Events That Push People Over
The surtax often hits people in a single unusual year rather than consistently high earners. Selling a business, exercising a large block of stock options, or cashing out an investment property can carry someone well past the threshold in a year when their regular income wouldn’t come close.
Home sales are a frequent concern. The surtax applies to gain from selling a primary residence to the same extent the gain is subject to federal income tax, which means the federal exclusion of up to $250,000 for a single filer or $500,000 for a married couple reduces your Massachusetts taxable income before the surtax calculation. In a state where values have risen sharply, a longtime homeowner selling a property worth $2 million or more can still have taxable gain above the exclusion that, combined with regular income, crosses the line.
When you can see one of these events coming, timing is the main lever. Spreading income across two tax years where legally possible can keep both years below the threshold, and charitable giving in the same year as a large gain can pull taxable income back under the trigger. These are straightforward consequences of a tax calculated on a single year’s income, not loopholes.
Married Couples Must File Jointly
Starting with tax year 2024, married couples who file jointly on their federal return must also file jointly in Massachusetts, with limited exceptions. There is no exception for couples subject to the surtax, even when the spouses have different residency statuses.{1Massachusetts Department of Revenue. Massachusetts 4% Surtax on Taxable Income} The threshold applies to the return, not to each spouse, so a joint return has a single inflation-adjusted threshold for combined income.
This matters. Two spouses each earning $600,000 would each stay below the threshold if they could file separately, but their combined $1.2 million on a joint return puts roughly $117,000 of income (using the 2025 threshold) into surtax territory. The mandatory joint filing rule closes the most obvious workaround, so couples near the line should factor it into decisions about when to recognize income and when to accelerate deductions.
Trusts, Estates, and Nonresidents
The surtax applies to every taxpayer subject to Massachusetts personal income tax under Chapter 62, including trusts, estates, and unincorporated associations with taxable income above the threshold.{1Massachusetts Department of Revenue. Massachusetts 4% Surtax on Taxable Income} Families using trusts to manage wealth should check whether trust-level income may also trip the Massachusetts threshold.
Nonresidents and part-year residents are not exempt. If your Massachusetts-source income exceeds the threshold, you owe the extra 4% on the portion above it. A nonresident who normally participates in a composite return filed by a partnership or S corporation must break out and file an individual Form 1-NR/PY to report the surtax if taxable income exceeds the threshold. That individual return must include all Massachusetts-source income, including income already reported on the composite filing.{1Massachusetts Department of Revenue. Massachusetts 4% Surtax on Taxable Income}
Estimated Payments and Filing
If you expect to cross the threshold, account for the extra 4% when calculating estimated tax payments. Failing to do so can produce underpayment penalties.{4Massachusetts Department of Revenue. AP 241 Estimated Income Tax Payments} Massachusetts generally requires that you pay at least 80% of your annual liability before filing, through withholding or estimated payments.{5Massachusetts Department of Revenue. Massachusetts DOR Estimated Tax Payments}
Quarterly estimated payments for calendar-year taxpayers are due April 15, June 15, September 15, and January 15 of the following year.{4Massachusetts Department of Revenue. AP 241 Estimated Income Tax Payments} Taxpayers subject to the surtax must file and pay electronically.{5Massachusetts Department of Revenue. Massachusetts DOR Estimated Tax Payments} Residents report income on Form 1; part-year residents and nonresidents use Form 1-NR/PY. The surtax is calculated as part of the regular return, so there is no separate form. The filing deadline follows the standard state schedule, typically April 15. Late payments accrue interest at a rate set by the Comptroller, which was 3.75% per year for the first half of fiscal 2026.{6Office of the Comptroller. Fiscal Year Memo 2026-11 Late Penalty Interest Rate}
How the Federal SALT Cap Affects You
Paying up to 9% in Massachusetts raises the question of how much of that comes back on your federal return. For tax year 2026, the federal state and local tax (SALT) deduction is capped at $40,400 for most filers. That cap phases down for taxpayers with modified adjusted gross income above $505,000, shrinking by 30 cents for every dollar over that threshold, with a floor of $10,000. Anyone paying the Massachusetts surtax sits well above $505,000, so most will see a significantly reduced SALT deduction federally.
State and local taxes also are not deductible at all when figuring the federal alternative minimum tax. If a large Massachusetts bill is coming, check whether AMT exposure increases the real cost of the surtax before you plan around it.