Boston residents pay Massachusetts income tax at a flat 5% rate on most income — with a 4% surtax (total 9%) on income above $1,000,000 since 2023 (the 'Millionaire Tax' or Fair Share Amendment). There is no separate Boston city income tax. Property tax in Boston is approximately $10.58 per $1,000 of assessed value for residential property, with an owner-occupant residential exemption that saves approximately $3,500/year. Massachusetts has no city-level sales tax — the state rate of 6.25% applies. Massachusetts estate tax applies to estates above $2,000,000.
At a glance
Key Facts
Massachusetts Income Tax — Flat 5% (Plus 9% Above $1M)
Massachusetts taxes individual income at a flat 5% rate on most income types (wages, business income, rents). Since January 1, 2023 (Fair Share Amendment / Millionaire Tax, passed by voters in November 2022): income above $1,000,000 is subject to an additional 4% surtax, making the effective Massachusetts rate on income above $1M equal to 9%. The $1M threshold is not indexed for inflation. Federal income tax on top: at $1M+, the combined federal (37%) + Massachusetts (9%) marginal rate = 46%. Short-term capital gains: Massachusetts taxes at 8.5% (not 5%). Long-term capital gains (assets held 1+ year): Massachusetts taxes at 5% (same as ordinary income — unlike most states and the federal government, Massachusetts does not give preferential rates to long-term capital gains).
The Millionaire Surtax (Fair Share Amendment)
The 4% surtax on Massachusetts income above $1,000,000 is one of the most significant state tax changes in recent years. It applies to: wages and salaries; business income; short-term capital gains; long-term capital gains; rental income; and virtually all other income types. The $1M threshold is per taxpayer — married couples filing jointly each have a $1M threshold (total $2M before surtax kicks in). Unlike California's 1% Mental Health Services Tax which applies at a similar income level, Massachusetts' 4% surtax is substantially larger. Impact: a Boston resident earning $2M in salary pays MA tax of ($1M × 5%) + ($1M × 9%) = $50,000 + $90,000 = $140,000 in Massachusetts income tax. A California resident earning the same $2M pays California income tax of approximately $230,000 — California still higher.
Boston Property Tax
Boston uses a classified property tax system with different rates for residential and commercial property: Residential (FY2026): approximately $10.58 per $1,000 of assessed value; Commercial (FY2026): approximately $24.92 per $1,000 of assessed value. The commercial rate is more than double the residential rate — a deliberate policy choice supported by the Boston City Council. Owner-occupant Residential Exemption: Boston homeowners who occupy their property as their primary residence qualify for an exemption that reduces their taxable assessed value by approximately $3,787 — saving approximately $40/year per $1,000 of exempted value, or approximately $3,500/year total in reduced property tax. Renters do not benefit from this exemption.
No Boston City Income Tax
Unlike New York City, Boston does not impose a separate city income tax on personal income. Residents pay Massachusetts state income tax only (5% standard / 9% above $1M). There is no Boston city income tax surcharge. However, Boston does impose a short-term rental excise tax (14% on Airbnb/VRBO-type rentals), a hotel/motel occupancy tax (local option adds to state hotel tax), and various local excise taxes.
Massachusetts Estate Tax
Massachusetts imposes an estate tax on estates with a gross value exceeding $2,000,000. Rates are progressive: 0.8–16% on estate values above $40,000. The $2M exemption is per person (not per couple like the federal exemption). There is NO portability between spouses for Massachusetts estate tax purposes — each spouse has their own $2M exemption. A married couple with a $5M combined estate may owe Massachusetts estate tax on the second death even if the surviving spouse inherited everything from the first spouse, depending on how assets are titled. Estate planning for Boston residents with estates above $2M should specifically address the Massachusetts non-portability issue.
Massachusetts Capital Gains Tax Rates
Massachusetts has unusual capital gains treatment: short-term gains (held under 1 year): taxed at 8.5%; long-term gains (held 1+ year): taxed at 5% (ordinary income rate — no preferential rate). This means Massachusetts investors do NOT benefit from federal long-term capital gains rates (0%/15%/20%) at the state level. A Boston resident with $500,000 in long-term capital gains pays $25,000 in Massachusetts tax (5%) in addition to federal capital gains tax. The effective combined rate on long-term capital gains for a Massachusetts resident in the 20% federal bracket: 20% federal + 3.8% NIIT + 5% Massachusetts = 28.8%.
Introduction
Boston is one of America's premier cities for education, healthcare, technology, and finance — and home to some of the country's top earners in those fields. Since 2023, Massachusetts has imposed a 4% surtax on income above $1,000,000, creating a two-tier income tax structure (5% standard, 9% on the millionaire tier) that significantly affects Boston's high-income residents. Property taxes in Boston are lower than many major US cities but contain a unique structure: commercial property is taxed at a much higher rate than residential, and an owner-occupant residential exemption provides meaningful savings. This guide covers the complete Boston tax picture.
Section 01
Boston Property Tax: The Commercial-Residential Split Explained
Boston's classified property tax system — where commercial property is taxed at roughly 2.4x the residential rate — is one of the most significant structural features of Boston real estate taxation.
Why Boston Has a Split Rate
Massachusetts law allows cities and towns to 'classify' property tax rates, applying different rates to different classes of property. Boston has used the maximum commercial rate differential allowed by state law since the 1980s. The stated rationale: to keep residential property taxes low for homeowners and renters while having commercial landlords and businesses bear more of the property tax burden. The practical effect: a $1M commercial building in Boston pays approximately $24,920/year in property tax, while a $1M residential condo pays approximately $10,580/year.
Impact on Commercial Real Estate
The high commercial rate makes Boston commercial real estate relatively expensive to hold on an after-tax basis compared to cities without a split rate. However, commercial property taxes are generally deductible as a business expense, partially offsetting the higher rate. Office building owners in Boston's downtown core have raised concerns that the high commercial rate makes Boston less competitive vs other cities for attracting anchor tenants. The Boston City Council reviews the classified rate annually and can adjust the commercial-to-residential ratio within state limits.
The Residential Exemption
Owner-occupants who use their Boston property as their primary residence can apply for the residential exemption — it reduces the assessed value used to calculate property tax by approximately $3,787 (FY2026 amount). To qualify: own and occupy the property as your primary residence on January 1 of the fiscal year; file an application with the Assessing Department by April 1. Non-owner-occupant investors (people who rent out their Boston property) and second home owners do not qualify. Condos, single-family homes, and two-family homes generally qualify if the owner lives in one unit.
Section 02
Tax Planning for High Earners in Boston Under the Millionaire Surtax
The 4% Millionaire Tax fundamentally changes tax planning for Boston residents with incomes near or above $1,000,000. Several strategies have gained renewed importance.
Timing Income Recognition
For taxpayers whose income fluctuates — business owners, consultants, commissioned salespeople — deferring or accelerating income to stay below the $1M threshold in specific years can save significant tax. Example: a consultant whose income varies between $800,000 and $1,300,000 can sometimes manage timing of receivables and project completion to stay in the 5% bracket in targeted years. This requires advance planning with a tax advisor.
Capital Gains Management
Since long-term capital gains are taxed at 5% (Massachusetts ordinary income rate, no preferential rate), Massachusetts residents already had less incentive to defer capital gains for state tax purposes. Under the new 9% rate above $1M, realising large capital gains requires careful analysis. A Boston resident who realises $1.5M in capital gains in one year may push $500,000 into the 9% bracket — potentially saving tax by spreading gains across multiple years if the investments allow it.
Charitable Deduction Planning
Massachusetts allows a charitable deduction equal to the federal charitable deduction amount. Bunching charitable contributions into high-income years (when the surtax applies) is particularly valuable, as the deduction reduces income above $1M at the 9% rate rather than the 5% rate. A $200,000 charitable contribution in a year with $1.5M income saves approximately $200,000 × 9% = $18,000 in Massachusetts tax (vs $10,000 if the same deduction were taken in a year below $1M).
Boston high earners face the 9% Millionaire Surtax, Massachusetts estate tax with no portability, and complex property tax rules. TaxHub connects you with Massachusetts tax specialists.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Does Boston have a city income tax like New York City?
No. Boston does not impose a city income tax on personal income. Boston residents pay Massachusetts state income tax (flat 5%, plus 4% surtax on income above $1M since 2023) but no separate Boston city income tax. This is an important distinction from New York City residents who pay NYC income tax of up to 3.876% on top of New York State tax. Boston's absence of a city income tax makes it less expensive than NYC from a pure income tax perspective, though Massachusetts' flat 5% rate is higher than many US states.
Q
How does Massachusetts' Millionaire Surtax compare to California's top rate?
For income above $1,000,000: Massachusetts effective rate = 9% (5% base + 4% surtax). California effective rate = 13.3% (12.3% base + 1% Mental Health Services Tax). California's top rate is still higher by 4.3 percentage points. However, California's top bracket starts much earlier — the 12.3% rate kicks in at $625,369 (single), while the 9% Massachusetts rate only applies above $1M. For incomes between $625,000–$1M, Massachusetts (5%) is dramatically cheaper than California (12.3%). Boston's overall tax burden for incomes in the $500K–$1M range is substantially lower than San Francisco or Los Angeles.
Q
What is the Massachusetts estate tax and how does it affect Boston residents?
Massachusetts imposes a progressive estate tax on estates with gross value exceeding $2,000,000. Rates range from 0.8% to 16% on amounts above $40,000. The $2M exemption applies per individual, and critically, Massachusetts does NOT allow portability between spouses (unlike the federal estate tax). This means a married couple cannot combine their exemptions without specific estate planning. Common strategies for Boston residents: bypass trusts (credit shelter trusts) to use both spouses' $2M exemptions; direct gifting of assets to reduce the estate below $2M per spouse; charitable bequests. A couple with a $5M estate who does no planning may owe approximately $250,000–$400,000 in Massachusetts estate tax on the surviving spouse's death.
Q
Are there short-term rental taxes in Boston for Airbnb hosts?
Yes. Short-term rentals in Boston (fewer than 31 consecutive days) are subject to: Massachusetts state excise tax of 5.7%; Boston local option excise tax of up to 6%; Boston Community Impact Fee of up to 3% for properties with 2+ units rented short-term; Boston Community Preservation Act surcharge. The combined rate varies but is typically 14–15% of rental revenue. Hosts must register with the Massachusetts Department of Revenue as a short-term rental operator and with the City of Boston. Platform operators like Airbnb collect and remit state and local taxes on behalf of hosts in Massachusetts — but hosts must still register and file.
Q
What happens to Massachusetts income tax if I move out of Boston mid-year?
In the year you move out of Massachusetts, you file as a part-year resident. Massachusetts taxes you on: all Massachusetts-source income for the full year (Massachusetts wages, Massachusetts rental property income), AND all worldwide income for the period you were a Massachusetts resident. After establishing residency outside Massachusetts, only Massachusetts-sourced income (from a Massachusetts employer, Massachusetts property, etc.) remains taxable to Massachusetts. The Massachusetts Department of Revenue looks at domicile — your permanent home where you intend to return — not just where you sleep on a given night. Maintaining a home in Massachusetts while claiming domicile elsewhere invites scrutiny.
Q
How does Boston's property tax residential exemption work in practice?
The Boston residential exemption reduces the assessed value of your property by approximately $3,787 for FY2026, directly reducing the property tax calculation. At the residential rate of ~$10.58 per $1,000: savings = $3,787 × ($10.58/1,000) = approximately $40 per thousand, or roughly $3,500/year. To receive the exemption: you must own and occupy the property as your principal residence on January 1; you must file an application with the Boston Assessing Department by April 1 of the fiscal year. The exemption automatically renews each year once you have filed. Property investors who do not live in their Boston properties do not qualify — it specifically rewards owner-occupancy.
Q
Does Massachusetts tax Social Security benefits?
No. Massachusetts does not tax Social Security benefits. Massachusetts also exempts most pension income for state and local government employees (Massachusetts public employee pensions are generally exempt from Massachusetts income tax). Federal pensions and military retirement pay are also exempt from Massachusetts income tax. Private pension income (from 401(k), IRA withdrawals, private employer pensions) is taxable in Massachusetts at the 5% rate. IRA distributions are taxable in Massachusetts to the extent they were deducted when contributed (i.e., traditional IRA withdrawals are taxable; Roth IRA qualified distributions are not).
Disclaimer:This guide provides general tax information for educational purposes only. Boston property tax rates are set annually by the Boston City Council and are subject to change. Massachusetts Millionaire Surtax thresholds are not inflation-adjusted. Massachusetts estate tax law is subject to legislative change. This is not tax advice. Consult a Massachusetts CPA for advice specific to your situation.