On making an exempt purchase, Exemption Certificate holders may submit a completed Massachusetts Sales Tax Exemption Form to the vendor instead of paying sales tax. If you are a Massachusetts business owner, you can learn more about how to collect and file your Massachusetts sales tax return at the 2025 Massachusetts Sales Tax Handbook . Bookkeeping for Startups Tips are considered part of an employee’s pay and must be taken into account when determining withholding. Employees must report tips from any one job totaling $20 or more in any given month to their employers by the 10th day of the following month. You should use this reported amount to calculate withholding by adding the reported tips to the employee’s pay.

Is the 4% surtax taken into account when calculating the estimated tax underpayment penalty on form M-2210?

Employees who choose to make adjustments will submit both Form W-4 and Form M-4 to the employer. As of January 1, 2020, IRS Form W-4 has been revised to reflect changes resulting from the TCJA where the withholding calculation is no longer tied to the number of personal exemptions claimed. Utilizing these key contacts and resources will empower businesses to navigate the complexities of Massachusetts sales tax obligations effectively. A much more sophisticated measure of a state’s tax burden is to look at how much a typical taxpayer actually pays. The following chart measures the state and local tax burden for a household earning the median income in the United States. But the above chart provides a rather crude measurement of comparative state and local tax burdens because everybody is lumped together regardless of income.

The 2025 Massachusetts State Sales Tax

While the state levies a 5% tax on income up to $1 million, ma income tax rate income over $1 million is taxed at 9%. 5% base rate + 4% surtax on amounts over $1,083,150 (2025 threshold). Get your paychecks right by quickly calculating your employees’ payroll taxes, withholdings and deductions. On top of these state taxes, you will also have to pay federal capital gains tax. Taxpayers are also entitled to deductions, such as childcare expenses, college tuition, and rental payments.

Massachusetts Tax Rates and Brackets

Your employer will subtract that amount from the amount due in Massachusetts state taxes and withhold the difference to cover your Massachusetts liability, too. The size of your paycheck will depend, of course, on your salary or wages. But it will also depend on your marital status, your pay frequency and any deductions from your earnings. One thing that doesn’t change, no matter where you live in the country, is FICA tax withholding. That’s the 6.2% for Social Security taxes and 1.45% for Medicare taxes that your employer withholds from every paycheck. Our handy payroll calculator will help you figure out the federal payroll tax withholding for both your employees and your business.

How much is estate tax in Massachusetts?

• Additionally, the funds in these retirement accounts grow tax-deferred, meaning that taxes on investment gains are not paid until the money is withdrawn during retirement, ideally at a lower tax rate.
• If denied, escalate to the Appellate Tax Board within specified timeframes for further review.
• This tool is freely available and is designed to help you accurately estimate your 2026 tax return.
• If the employee doesn’t have to substantiate expenses or return excess payments, the payments must be included in the employee’s wages and are subject to withholding.
• As of tax year 2023, personal income taxpayers must pay an additional 4% (4% surtax) on taxable income over the surtax threshold.
• The state extension deadline follows the federal extension deadline set by the IRS, which is Oct. 15, 2025.

Massachusetts does not allow local jurisdictions like cities or counties to collect a local sales tax. You can view the accounting sales tax rates for various cities in Massachusetts here. Massachusetts doesn’t collect sales tax on purchases of most prescription drugs and groceries. Prepared Food is subject to special sales tax rates under Massachusetts law. In most states, necessities such as groceries, clothes, and drugs are exempted from the sales tax or charged at a lower sales tax rate. If the employee can substantiate their travel or other reimbursable expenses, and they return to the employer any amount that exceeds the substantiated expenses, then these payments aren’t subject to withholding.

Individual Taxes

Additionally, some jurisdictions like NYC (14.78% combined), Yonkers, and Maryland counties have local taxes. Our calculator includes these local tax jurisdictions for accurate estimates. This is a payroll calculator Massachusetts small business owners count on to make sure they’re paying employees correctly for their hard work. All you have to do is grab their W-4 and their wage information, and OnPay’s calculator will do rest of the work for you.