Massachusetts does not use the federal capital gains rates. It has its own rates, set by how long you held the asset, and a 4% surtax that applies to very high incomes.
This guide sets out the rates the Massachusetts Department of Revenue (DOR) publishes, how the holding period works, the optional 5.85% rate, how capital losses are treated and how the 4% surtax is applied, with worked examples we calculated ourselves. It does not cover nonresident or part-year sourcing rules in detail.
The DOR states: "Massachusetts taxes most long-term gains at 5% and taxes long-term gains from the sale or exchange of collectibles at 12% (subject to a 50% deduction)." Short-term gains are taxed at 8.5% for tax years beginning on or after January 1, 2023. For tax years ending on or before December 31, 2022, short-term gains were taxed at 12%.
The DOR rates page was last updated on December 30, 2025 and lists the same three capital gains rates. The DOR lists these personal income tax rates as applying to Massachusetts residents, nonresidents and part-year residents. The federal rate is separate: the DOR notes that the federal rate on capital gains varies.
| Type of gain | Massachusetts rate |
|---|---|
| Long-term (most assets) | 5% |
| Short-term | 8.5% |
| Long-term collectibles | 12% (subject to a 50% deduction) |
A DOR Technical Information Release explains that long-term gains are gains from the sale or exchange of capital assets, except collectibles, held for more than one year. Gains from capital assets held for one year or less are short-term gains.
Because the short-term rate (8.5%) is higher than the long-term rate (5%), the holding period decides which rate applies to the same dollar of profit. That TIR dates from 2002, so treat its holding-period wording as the longstanding rule and check the current Form 1 instructions for your year.
The 2025 Form 1 instructions explain that personal income tax forms must provide an election to voluntarily pay tax at a rate of 5.85% on taxable income that would otherwise be taxed at 5.0%. The instructions state that the election does not apply to items of income taxed at 8.5% (short-term capital gains) and 12% (gains on collectibles).
The 2026 draft Schedule D (an early-release draft marked do not file) multiplies taxable long-term gains by .05, or by .0585 if you choose the optional rate. The sources we read do not explain why a taxpayer might make the election, so we do not recommend either way.
Starting with tax year 2023, taxpayers pay an additional 4% on taxable income over $1,000,000, increased annually for inflation. The DOR rates page gives these thresholds: $1,053,750 for tax year 2024, $1,083,150 for tax year 2025 and $1,107,750 for tax year 2026. The DOR surtax page (updated June 1, 2026) lists the same figures and none for 2027; we found no 2027 threshold published as of November 2, 2026, so check the DOR page for it.
The statute applies the surtax to the portion of combined taxable income over the threshold, and says a loss in one category of income is not used to reduce income in another category when working out that total. The surtax therefore depends on your total taxable income, not on whether any one dollar is a capital gain. The rates page lists the surtax against long-term gains, short-term gains and collectibles alike.
Massachusetts differs from the federal rules on losses. The DOR states that Massachusetts allows losses to offset any amount of gain (offset limited to amount of gain) and to offset up to $2,000 of interest and dividends, and that capital losses cannot be used against other ordinary income. The Schedule D also has a line for Massachusetts carryover losses from the prior year's Schedule D.
These examples are ours, calculated with a script from the rates above. They use the 2026 surtax threshold of $1,107,750, ignore deductions, exemptions and credits, and treat every dollar as taxable income at the stated rate.
| Scenario | Calculation | Result |
|---|---|---|
| $100,000 long-term gain | $100,000 x 5% | $5,000 |
| Same gain, optional 5.85% rate | $100,000 x 5.85% | $5,850 |
| $100,000 short-term gain | $100,000 x 8.5% | $8,500 |
| $100,000 collectibles gain | $50,000 (after 50% deduction) x 12% | $6,000 |
| $1,300,000 taxable income, all long-term gain, 2026 | $1,300,000 x 5% = $65,000, plus ($1,300,000 - $1,107,750) = $192,250 x 4% = $7,690 | $72,690 (about 5.59% overall) |
| $200,000 short-term gain, income below the threshold | $200,000 x 8.5% = $17,000, versus $10,000 if long-term | $7,000 extra |
Real returns include exemptions, deductions and other income taxed at different rates, so use these only as illustrations of the rate mechanics.
We have not covered how Massachusetts taxes nonresidents and part-year residents on gains, the rules for qualified small business stock or installment sales (the Schedule D itself directs certain gains to Schedule D-IS), or federal capital gains rates. Check the Form 1 and Form 1-NR/PY instructions on mass.gov/dor for those. DOR figures change by tax year, so confirm the year you are filing.
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