Personal Income Tax for Residents

Massachusetts has always been known for its unique approach to state taxes, and 2025 brings some important updates that every resident, newcomer, and business owner should understand. Whether you are a recent immigrant settling in Massachusetts, a long-time resident, or an employer helping new arrivals, knowing the current income tax rates and the new surtax rules is essential. This update explains what has changed, who is affected, what actions are required, and how these rules might impact pending applications or future plans.

• Employers typically withhold federal income taxes from your paycheck throughout the year.
• The PTE must also provide each qualified member with a Massachusetts Schedule K 1 reporting amounts of PTE income or loss derived from or connected with Massachusetts sources.
• Federal income tax applies to all US taxpayers regardless of state.
• The Federal income tax also has a standard deduction, personal exemptions, and dependant deductions, though they are different amounts than Massachusetts’ and may have different rules.
• While the state levies a 5% tax on income up to $1 million, income over $1 million is taxed at 9%.
• This is the total federal income tax divided by your taxable income.

Withholding For Pension or Annuity Payments

• This record-keeping is crucial in case of IRS inquiries or if you need to reference past tax information.
• If filing by hand, use the tax tables or schedules provided in the IRS instructions to calculate your tax owed.
• According to the Massachusetts government, long-term capital gains are taxed at the standard 5% state income tax rate and are classed as income tax by the state.
• Machine-readable form includes file uploads through MassTaxConnect and electronic data transfer.
• If her income exceeds $1 million, she pays the 4% surtax on the extra amount.

She only pays state income tax on other income, like part-time work or investments. In general, withdrawals from retirement accounts are taxable for both federal and state purposes to the extent they are determined to consist of contributions that were not previously subject to tax. Due to differences in the taxability of contributions for federal and state purposes, the amount of such contributions may be different for state and federal purposes, resulting in different taxable amounts.

File or Pay on Paper

However, extensions can be obtained by filing Form 4868 with the IRS before the deadline. Extensions grant you an additional six months to file your return but not to pay any taxes owed. Remember, even if you file an extension, any taxes owed are still due by the original deadline to avoid penalties. While this guide focuses on federal income tax, it’s important to remember that Massachusetts also has its state income tax. Additionally, some localities within Massachusetts may impose local income taxes.

• However, Massachusetts recently enacted legislation that allows a $10,200 exclusion with respect to unemployment compensation for taxpayers whose household income is not more than 200% of the federal poverty level.
• Thus, payments of estimated PTE Excise, which result in the credit, reduce the required amount of PTE withholding or estimated tax.
• While the tax rate is set explicitly by the Massachusetts legislature, the Massachusetts personal exemption is indexed to inflation and changes every year.
• Keep a copy of all Forms 1099-G with your 2024 tax records and be aware that DOR may ask for an explanation of why the amount shown on the Form 1099-G was not reported on the return.
• If you’re an employer who has 50 or more employees, you must give us Forms W-2 in a machine-readable form and file them with us by the last day of March for the preceding year.
• DOR will then process a refund of the estimated payments to the PTE.
• Both forms have a line where you can write in an additional dollar amount to withhold from each paycheck.

Feb 20 How Much Is $70,000 After Taxes in Massachusetts?

The tax is $3.51 per pack of 20, which puts the average price of cigarettes in Massachusetts at around $9 per pack.

• An overpayment claimed on a return may be applied as a credit for your next year’s estimated tax or you may request that it be refunded to you.
• Massachusetts has its own estate tax, which applies to any estate above the exclusion amount of $2 million.
• If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• If you’re a nonresident with an annual Massachusetts gross income of more than either $8,000 or the prorated personal exemption, whichever is less, you must file a Massachusetts tax return.
• You can file a new W-4 or M-4 and request a specific dollar amount of additional withholding from each paycheck.

Therefore, you wouldn’t register for withholding solely to pay your own taxes. However, if you Liability Accounts expect to owe more than $400 in Massachusetts income tax on the income you receive from your business, you must make individual estimated income tax payments. Anyone who files a Massachusetts state tax return is given a personal exemption amount based on their tax filing status.

Do penalties apply to underpayments of PTE Excise for the 2022 and future taxable years?

ARPA amends Code § 162(m) to further limit the deduction of executive compensation by publicly traded corporations. Prior law limited the deduction to $1,000,000 for the three highest paid corporate officers. ARPA applies the limitation to the next five highest compensated employees, in addition to the top three.51  The additional disallowance is set to take effect for tax years beginning after December 31, 2026.

Federal income tax rates and brackets

The credits under CTRA and ARPA are excluded from federal gross income. Both the Massachusetts personal income tax and the corporate excise rely on the Internal Revenue Code (“Code”) for the definition of gross income and bookkeeping the determination of certain deductions. This is because income which is not included in federal gross income will not be included in Massachusetts income for tax purposes unless specifically added by chapter 62 of the General Laws. Massachusetts does not have a standard deduction, but it allows many of the same itemized deductions as the federal government, as well as some additional ones. Yet, the federal tax withholding impacts the final paycheck amount.

What is retirement tax in Massachusetts?

Note that required 2021 fourth quarter PTE ma income tax rate withholding and members’ estimated taxes may be determined taking into account any PTE Excise previously paid for the 2021 tax year. Massachusetts is characterized by a flat personal income tax rate of 5% of federal adjusted gross income. As of 2023, an extra 4% tax applies to income exceeding $1 million. Property taxes in Massachusetts are relatively high, and the state also imposes an estate tax.