What income does the Massachusetts surtax apply to?

The 4% surtax applies to all Massachusetts taxable income above $1,000,000, including ordinary income (wages, self-employment, IRA distributions), long-term capital gains, and short-term capital gains. The threshold is applied to total Massachusetts income — all income types count together toward the $1M ceiling. The surtax is not applied separately to each income category. For example, with $700K ordinary income and $400K in long-term capital gains ($1.1M total), $100K is subject to the 4% surtax.

Does the $1M threshold adjust for inflation?

No. The $1,000,000 threshold is fixed in the Massachusetts Constitution via the ballot amendment — it cannot be adjusted for inflation by the legislature. Unlike most tax brackets (which are inflation-indexed), the surtax threshold will erode in real terms each year. A $1M income in 2023 will represent significantly less purchasing power by 2033, meaning more taxpayers will become subject to the surtax over time without any actual increase in real income.

Is there a marriage penalty in the Massachusetts surtax?

Yes — the MA surtax creates a significant marriage penalty for dual high-income couples. The $1M threshold is the same for single and married filing jointly filers. A couple where each spouse earns $700,000 ($1.4M combined) owes surtax on $400,000 when filing jointly. If they file separately, each has $700K — below the $1M threshold — and owes zero surtax. Filing separately can save tens of thousands of dollars per year, but may affect other items. Consult a Massachusetts CPA to model the full impact of filing status separately versus jointly.

What is the effective combined Massachusetts rate above $1M?

For income above $1,000,000, the combined Massachusetts rate is: Ordinary income and long-term capital gains: 5% regular + 4% surtax = 9%. Short-term capital gains: 8.5% regular + 4% surtax = 12.5%. These rates do not include federal income tax (which applies on top) or the 3.8% NIIT (Net Investment Income Tax) that may apply to investment income for high-income filers. The combined federal + state + NIIT marginal rate on short-term capital gains for a Massachusetts filer can exceed 50%.

Can the surtax be avoided by moving out of Massachusetts?

Yes, but timing matters. Massachusetts taxes income earned while you are a MA resident. If you sell a large asset (business, appreciated stock, real estate) and establish residency in a no-income-tax state first, you may avoid the MA surtax on the gain — but the timing of residency change and the nature of the income source matter significantly. MA-sourced income (e.g., gain from selling MA real estate or a MA business) may still be taxable in MA regardless of where you live. Consult a tax attorney before attempting residency-based planning for large taxable events.

Tax

Massachusetts Millionaires Surtax Calculator (Fair Share Amendment)

Calculate your Massachusetts 4% surtax on income above $1,000,000 — including the marriage penalty for dual high-income couples and estimated savings from filing separately.

By The FinCalc TeamUpdated May 30, 2026

Massachusetts voters approved the "Fair Share Amendment" (Question 1) in 2022, adding a 4% surtax on Massachusetts income above $1,000,000 starting in 2023. The surtax applies on top of MA's regular flat income tax rate, bringing the combined rate to 9% on ordinary income and 12.5% on short-term capital gains above the threshold. Critically, the $1M threshold is NOT doubled for married couples filing jointly — both statuses share the same $1M cutoff, creating a significant marriage penalty for dual high-income households.

How the Massachusetts Millionaires Surtax Works

The Two-Rate System Above and Below $1M

Massachusetts has a flat income tax structure — but the surtax creates a two-tier system:

| Income | Ordinary / LTCG Rate | Short-Term CG Rate | |--------|---------------------|-------------------| | First $1,000,000 | 5.00% | 8.50% | | Above $1,000,000 | 9.00% (+4% surtax) | 12.50% (+4% surtax) |

The surtax does not create a cliff — it only applies to the portion above $1M, not the entire income. But the threshold is the same for all filing statuses.

The Marriage Penalty

The most counterintuitive aspect of the MA surtax: the $1M threshold is not doubled for married filing jointly, unlike the federal system. This creates a pure marriage penalty for dual high-income couples:

| Scenario | MFJ Filing | Separate Filing | Annual Savings | |----------|-----------|-----------------|----------------| | Spouse A: $700K, Spouse B: $700K | Surtax on $400K = $16,000 | Zero surtax | $16,000/year | | Spouse A: $900K, Spouse B: $400K | Surtax on $300K = $12,000 | Zero surtax | $12,000/year | | Spouse A: $1.2M, Spouse B: $200K | Surtax on $400K = $16,000 | Surtax on $200K = $8,000 | $8,000/year |

When to Use This Calculator

When planning a large capital event — a business sale, real estate transaction, or large stock sale may push you above the $1M threshold. Model the surtax impact before executing the transaction to understand after-tax proceeds.

When evaluating MFJ vs. MFS filing status — if both spouses earn significant income, the surtax savings from filing separately may outweigh the other costs of separate filing. This calculator estimates the difference.

When considering a year-end Roth conversion or capital gain harvest — these income additions can push total Massachusetts income above $1M, triggering the 4% surtax on the excess. Plan the size of these transactions with the MA surtax in mind.

When evaluating Massachusetts residency vs. relocation — for business owners and investors who can control the timing and location of large income events, the MA surtax adds 4% on top of already-high Massachusetts taxes. Model the combined federal + MA + NIIT burden.

Related Calculators

NIIT Calculator — the 3.8% federal net investment income surtax compounds on top of the MA surtax for high earners
S-Corp Reasonable Compensation Calculator — if business income is structured through an S-Corp, reasonable compensation planning affects the MA surtax base

Understanding the Inputs

Filing Status: Massachusetts uses three filing statuses: Single, Married Filing Jointly (MFJ), and Married Filing Separately (MFS). Unlike the federal income tax, which doubles most brackets for MFJ filers, the Massachusetts $1,000,000 surtax threshold is NOT adjusted for filing status. A married couple filing jointly with combined income of $1.5M pays surtax on $500,000 — exactly the same as a single filer with $1.5M income. This means dual-income couples earning $600K each ($1.2M combined) would owe surtax on $200K when filing jointly but would owe NO surtax if each filed separately ($600K < $1M threshold).
Ordinary Income: Massachusetts ordinary income includes wages, salaries, net self-employment income, business income, IRA distributions, rental income, and ordinary interest and dividends. In MA, ordinary income is taxed at a flat 5% rate (plus 4% surtax on the portion above $1M). This differs from the federal system where capital gains and qualified dividends receive preferential rates. In Massachusetts, long-term capital gains are taxed at the same 5% rate as ordinary income — not the federal 0%/15%/20% schedule.
Long-Term Capital Gains: Gains on assets held more than one year. While the federal rate for most taxpayers is 15% or 20%, Massachusetts taxes long-term capital gains at the same flat 5% rate as ordinary income. Above the $1M threshold, the combined MA rate on long-term capital gains is 9%. This matters for planning — a taxpayer who can time a large asset sale across two tax years might keep income below $1M each year, avoiding the surtax entirely.
Short-Term Capital Gains: Gains on assets held one year or less. Massachusetts taxes short-term capital gains at a higher rate of 8.5% — significantly above the 5% ordinary income rate. Above the $1M threshold, the combined MA rate on short-term capital gains is 12.5%. This rate differential between short- and long-term gains is more pronounced in Massachusetts than at the federal level, making holding period management especially important for MA taxpayers.
Income Allocated to Lower-Earning Spouse: When filing status is Married Filing Jointly, this field shows how much of the total income is attributable to one spouse (the lower earner). If each spouse has individual income below $1M, filing separately would give each their own $1M threshold — potentially eliminating the surtax. The calculator estimates the tax under separate filing and shows potential annual savings. Caution: filing separately may affect other deductions and credits. Consult a MA tax advisor before changing filing status, as separate filing has implications beyond just the surtax.

Frequently Asked Questions

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The FinCalc Team

Personal Finance Experts

The FinCalc team is a group of personal finance writers, analysts, and engineers dedicated to building accurate, transparent financial calculators. Every formula is verified against industry standards and explained in plain language.

Last reviewed and updated: May 30, 2026