Massachusetts Wealth Tax: Threshold, Filing, and Penalties

The Massachusetts wealth tax is a 4% surtax on individual taxable income above $1,107,750 for tax year 2026, added on top of the state’s flat 5% income tax. It isn’t actually a tax on wealth. It’s an income surtax, which means it looks at what you earn in a given year rather than what you own, and it applies dollar for dollar only to income above the threshold. Voters approved it as the Fair Share Amendment in 2022, and it took effect for tax year 2023.¹

How the Surtax Stacks on Existing Rates

Every dollar of taxable income up to the threshold is taxed at the standard 5% rate. Every dollar above it is taxed at 9% (the base 5% plus the 4% surtax). The statutory authority is M.G.L. c. 62, § 4(d), which also directs the threshold to adjust annually using the federal cost-of-living formula under IRC § 1(f).²

One detail catches people off guard. Massachusetts taxes short-term capital gains at 8.5%, not 5%. If short-term gains push you above the threshold, the surtax stacks on top of that higher rate, so you’d pay 12.5% on those gains.³

The 2026 Threshold and How It Has Moved

The threshold adjusts each year for inflation using the Consumer Price Index. If you’re near the line, the exact number matters, so check the Massachusetts Department of Revenue site before timing a sale or a bonus.

2023: $1,000,000
2024: $1,053,750
2025: $1,083,150
2026: $1,107,750

What Income Counts Toward the Threshold

The surtax applies to your total Massachusetts taxable income, not just wages. The statute adds up Part A taxable income (interest, dividends, and long-term capital gains), Part B taxable income (wages, salaries, and other earned income), and Part C taxable income (short-term capital gains). If any part is negative, it’s treated as zero for this calculation. You cannot use a loss in one category to offset income in another for surtax purposes.²

The numbers come straight off your Massachusetts Form 1 (residents) or Form 1-NR/PY (nonresidents and part-year residents), using the same categories reported federally after Massachusetts-specific deductions.¹

Home Sales, Business Sales, and Other One-Time Events

This is where the surtax bites hardest for people who aren’t regularly high earners. The Massachusetts Department of Revenue is explicit that there is no special exclusion from the surtax for income from the sale of a personal residence. If the gain is part of your taxable income, it counts.¹

The federal Section 121 exclusion ($250,000 for single filers, $500,000 for joint filers) still applies before the Massachusetts calculation and reduces your taxable gain. But in parts of Greater Boston, longtime homeowners often have gains well past even the $500,000 exclusion. Someone who bought in Cambridge for $300,000 two decades ago and sells for $1.5 million can easily cross the surtax threshold in the year of the sale.

The same logic applies to selling a business, exercising a large block of stock options, or cashing out a retirement account in a lump sum. Massachusetts offers no income averaging or smoothing mechanism. Each tax year stands on its own, so a one-time windfall is treated identically to recurring high income. If a major liquidity event is coming, the timing can meaningfully change your state tax bill.

Married Couples Must File Jointly

Starting with tax year 2024, all married couples who file jointly on their federal return must also file jointly in Massachusetts. There’s no workaround where spouses file separately at the state level to stay under the threshold individually.¹

The threshold applies to the combined income on the joint return, not to each spouse separately. A couple where one spouse earns $800,000 and the other earns $400,000 has $1,200,000 in combined income, putting $92,250 above the 2026 threshold and generating roughly $3,690 in surtax. The joint filing rule holds even when spouses have different residency statuses or different periods of Massachusetts residency during the year.

Trusts and Estates

The 4% surtax also applies to fiduciary income. Irrevocable trusts and estates that file Massachusetts fiduciary returns face the surtax on taxable income above the same threshold ($1,107,750 for 2026). Trusts that accumulate income rather than distributing it to beneficiaries are taxed at the trust level, so a trust that realizes a large capital gain in a single year can trigger the surtax on its own.³

Estimated Payments You Probably Owe

If you expect to owe more than $400 in Massachusetts income tax on income not covered by withholding, you’re required to make quarterly estimated payments. For anyone subject to the surtax, this is almost always the case. Employers don’t typically withhold the extra 4% from wages, and investment income rarely has state tax withheld at all.⁴

The 2026 quarterly deadlines:

First quarter: April 15, 2026
Second quarter: June 16, 2026
Third quarter: September 15, 2026
Fourth quarter: January 15, 2027

To avoid an underpayment penalty, you need to pay at least 80% of your total tax liability by the filing deadline through a combination of withholding and estimated payments.⁵

Getting estimated payments wrong is the most common expensive mistake with the surtax. Someone who earns a steady $900,000 salary and then sells stock for a $300,000 gain in December may not have made any estimated payments toward the surtax portion all year. The underpayment interest runs at the federal short-term rate plus four percentage points, compounded daily, which adds up fast on a five- or six-figure bill.⁶

Filing, Extensions, and Penalties

The surtax is filed as part of your regular Massachusetts return through MassTaxConnect. There is no separate form. The calculation is built into Form 1 or Form 1-NR/PY, and the filing deadline follows the standard state income tax deadline (April 15 for most taxpayers). Payment runs through the portal via bank transfer or credit card.¹

If you need more time, Massachusetts generally grants an automatic six-month extension, but only if you’ve paid at least 80% of your total tax liability by the original due date. An extension gives you more time to file, not more time to pay. Any unpaid balance accrues interest from the original deadline regardless of the extension.⁷

The penalty structure:

Late filing: 1% per month (or fraction) of the unpaid tax, up to 25%
Late payment: 1% per month of the unpaid tax, up to 25%
Underpayment of estimated tax: interest at the federal short-term rate plus four percentage points, compounded daily

Late filing and late payment penalties can sometimes be waived for reasonable cause. Interest on unpaid tax cannot be waived or reduced under any circumstances.⁶

1
Mass.gov. Massachusetts 4% Surtax on Taxable Income
2
The 194th General Court of the Commonwealth of Massachusetts. Massachusetts General Laws Chapter 62 Section 4
3
Mass.gov. Massachusetts Tax Rates
4
Massachusetts Department of Revenue. Massachusetts DOR Personal Income and Fiduciary Estimated Tax Payments
5
Massachusetts Department of Revenue. Massachusetts DOR Tax Due Dates and Extensions
6
Mass.gov. Massachusetts Penalties and Interest Assessed by DOR
7
Massachusetts Department of Revenue. File an Extension and Pay MA Personal Income, Fiduciary, or Partnership Tax