How Much Is Capital Gains Tax in Massachusetts?

Massachusetts capital gains tax is 8.5% on assets held one year or less, 5% on assets held longer than a year, and 12% (with a 50% deduction) on long-term gains from collectibles. A separate 4% surtax applies to the portion of your total income above roughly $1.1 million.

Short-Term Gains: 8.5%

Sell a stock, bond, piece of real estate, or most other capital assets within a year of buying it, and the profit is a short-term capital gain taxed at a flat 8.5%. The rate took effect for tax years beginning on or after January 1, 2023, when Massachusetts reduced it from 12%.¹

The rate is flat. It doesn’t climb with your income the way federal short-term rates do, although the surtax described below can add to it at very high incomes. Short-term gains are reported as what Massachusetts calls Part A income, separate from your wages.²

Long-Term Gains: 5%

Hold an asset for more than a year, and the gain is taxed at the state’s flat 5% income tax rate when you sell.³ That covers stocks, bonds, mutual funds, and real estate held more than 12 months. Collectibles are the one meaningful exception.

This is where Massachusetts diverges sharply from federal rules. The IRS taxes long-term gains at 0%, 15%, or 20% depending on your income. Massachusetts applies 5% to everyone, regardless of total income.

Collectibles: 12% With a 50% Deduction

Long-term gains from selling art, antiques, coins, precious metals, and similar collectibles are taxed at 12% rather than 5%. Massachusetts then allows a 50% deduction on those gains, which cuts the effective tax roughly in half.³ The 12% rate was not lowered when the state dropped short-term gains to 8.5% in 2023.¹

Sell a collectible you’ve owned a year or less and the profit is just a short-term gain at 8.5%. The 12% rate only applies to long-term holdings.

The 4% Millionaire Surtax

On top of the rates above, Massachusetts imposes an additional 4% tax on the portion of your annual income that exceeds a set threshold. The surtax, created by Article CXXI of the state constitution (the Fair Share Amendment), took effect in 2023.⁴ The initial threshold was $1,000,000 and is adjusted for inflation each year. For 2026, it’s approximately $1,107,950.

The surtax applies to total taxable income from all sources combined, including capital gains. So if a long-term gain pushes you past the threshold, the portion above the line is taxed at 9% (5% plus the 4% surtax). A short-term gain in the same position faces 12.5% (8.5% plus 4%).

Exemptions That Can Reduce the Bill

Sale of a Primary Residence

Massachusetts follows the federal exclusion for the sale of a main home: up to $250,000 of profit for single filers, or $500,000 for married couples filing jointly, is excluded from income if you owned and used the home as your primary residence for at least two of the five years before the sale.⁵ Anything above those limits is taxed at the short- or long-term rate based on how long you owned the home.

Qualified Small Business Stock

Massachusetts allows a 50% exclusion on gains from qualifying small business stock (Section 1202 or QSBS stock). The state ties this to the federal Internal Revenue Code as it stood in 2005, so it has not adopted the current federal 100% exclusion.⁶ The stock generally must be in a domestic C corporation with limited gross assets, acquired directly from the company, and held for the required period.

How Losses Offset Your Gains

Capital losses offset capital gains dollar for dollar on your Massachusetts return, with no cap on how much loss you can apply against gains in a single year.³

If your losses exceed your gains, Massachusetts lets you apply up to $2,000 of the leftover loss against interest and dividend income. You cannot deduct capital losses against wages or other ordinary income.² Federal rules are more generous: up to $3,000 of net losses can offset any ordinary income, including wages.⁷ Any unused loss carries forward to future years under both systems.

Estimated Payments After a Big Sale

Capital gains don’t come with automatic withholding, which trips up a lot of sellers. If you expect to owe more than $400 in Massachusetts tax on income with no withholding, you’re required to make quarterly estimated payments.⁸

The state generally expects at least 80% of your annual tax liability to be paid in through withholding or estimated payments before you file. Falling short triggers interest and penalties measured from the original due date.⁸ Federal rules are similar but use a 90% threshold for current-year tax, or 100% of the prior year’s tax.⁹

Quarterly due dates are April 15, June 15, September 15, and January 15 of the following year, for both state and federal. If a large gain hits in a single quarter, you can increase that quarter’s payment rather than spreading the liability across all four.

How to Report and Pay

Capital gains go on your annual Massachusetts income tax return. The 2025 return is due April 15, 2026.¹⁰ Two supporting schedules handle the detail:

Schedule B reports short-term capital gains and losses, along with long-term gains on collectibles.¹¹
Schedule D reports long-term capital gains and losses, with certain totals flowing into Schedule B.¹²

Both schedules want a description of each asset, the purchase and sale dates, the gross sale price, and your adjusted cost basis (what you paid plus improvements, legal fees, and similar costs). Sale price minus adjusted basis is your taxable gain or deductible loss.

Most filers use the MassTaxConnect portal to file and pay by bank account or credit card, though paper filing by mail is still accepted.¹³ An extension to October 15 is available if you need more time to file, but it only delays the paperwork. Any tax still owed after April 15 accrues interest even with an extension on file.¹⁰

What Happens If You Pay Late

Massachusetts charges a late payment penalty of 1% of the unpaid tax for each month or partial month the balance remains outstanding, up to a maximum of 25%.¹⁴ Interest runs on top of the penalty. Missing the 80% estimated payment threshold also generates interest and penalties, calculated back to the original due date.¹⁰

Keep the paperwork. Purchase confirmations, closing statements, brokerage statements, and improvement receipts should be held for at least three years after the filing due date or the date you actually filed, whichever is later.¹⁵

1
Massachusetts Department of Revenue. TIR 24-4: Provisions in the 2023 Tax Relief Legislation
2
General Court of Massachusetts. Massachusetts General Laws Chapter 62 Section 2
3
Massachusetts Department of Revenue. Differences Between MA and Federal Tax Law for Personal Income
4
General Court of Massachusetts. Massachusetts Constitution – Articles of Amendment
5
Governor’s Budget. 1.000 Exclusions from Gross Income
6
Massachusetts Department of Revenue. Favorable Tax Treatment of Qualified Small Business Stock (QSBS) Gain
7
Internal Revenue Service. Topic No. 409, Capital Gains and Losses
8
Massachusetts Department of Revenue. Massachusetts DOR Estimated Tax Payments
9
Internal Revenue Service. Estimated Taxes
10
Massachusetts Department of Revenue. Massachusetts DOR Tax Due Dates and Extensions
11
Massachusetts Department of Revenue. 2024 Schedule B – Interest, Dividends and Certain Capital Gains and Losses
12
Massachusetts Department of Revenue. 2024 Schedule D – Capital Gains and Losses
13
Massachusetts Department of Revenue. E-file and Pay Your MA Personal Income Taxes
14
General Court of Massachusetts. Massachusetts General Laws Chapter 62C Section 33
15
Massachusetts Department of Revenue. 830 CMR 62C.25.1 Record Retention