An Overview of Massachusetts State Taxes
Each spring, most Americans who earn an income are required to file their taxes. No matter where you live, it’s a good idea to understand changes to tax rates and tax obligations in order to ensure that you’re in compliance with local regulations as well as to maximize your tax return.
Tax law can differ substantially from state to state, especially in regard to sales tax, income tax, and property tax. Whether you’re filing Massachusetts state taxes for the first time, are curious about tax law, or simply need a refresher, this guide will help provide insight about taxes in Massachusetts and advice when it comes to filing taxes.
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Massachusetts State Income Tax
In 2019, Massachusetts had a 5.05% tax on income. This includes both earned income such as salaries, wages, and tips, and unearned income such as interest, dividends, and capital gains. Unlike with federal income taxes, Massachusetts doesn’t have any different income brackets, but instead charges everyone a flat rate regardless of how much (or little) they make.
Anyone who has a Massachusetts gross income over $8,000 is required to file a state tax return. This includes full-year residents, part-year residents, and non-residents with an annual Massachusetts gross income of at least $8,000.
Income Tax Exemptions
Tax exemptions can lower your tax burden if you qualify for certain special situations, such as adopting a child or taking care of dependents. There are a variety of exemptions, benefits, and deductions available for people filing taxes in Massachusetts, including for:
- Massachusetts bank interest;
- Age 65 or over;
- College tuition;
- Student loan interest;
- Rental payments;
- Certain commuter costs;
- Personal exemption;
Earned Income Tax Credit
The Earned Income Tax Credit is another way that some Massachusetts taxpayers can lower their tax burden. This tax credit applies to people filing taxes in Massachusetts as single, head of household, or married filing jointly who make under a certain amount. The Earned Income Tax Credit also gives additional tax breaks for qualifying children. Depending on how many children you have, your income must be between $15,570 and $50,162 to qualify.
Mass State Sales Tax
The Massachusetts state sales tax is 6.25%. Vendors are required to collect sales tax on purchases, and must then send this amount to the state. Sales tax applies to retail purchases as well as to utilities and some telecommunications services. Massachusetts also charges a use tax of 6.25% for items on which there is no sales tax, items that are going to be used, stored, or consumed in Massachusetts.
Sales Tax Exemptions
Some items are exempt from sales tax in Massachusetts. This includes:
- Food (not including restaurants);
- Clothing under $175;
- Periodicals, newspapers, and magazines;
- Admissions tickets;
- Utilities to residential users, small businesses, and certain industrial users;
- Transportation services;
- Personal or professional services including accounting, insurance, haircuts, car repairs, as well as legal and medical services;
- Out of state deliveries;
- Government agencies;
- Sales to certain contractors and subcontractors;
Massachusetts Property Taxes
Property taxes in Massachusetts may vary from town to town. Property taxes are based on the assessed value of a given property. The amount due for a property tax is determined by the value of a property in relation to the overall property tax levy of a town, city, or municipality.
Your property tax obligation is dependent on the fair market value of your property, which is determined by a property assessor. The amount you have to pay in property taxes is also partially determined by the levy, which is the overall amount of revenue collected through property tax for your town, city, or municipality. Enacted in 1980, Proposition 2½ has changed how property taxes work, and how different towns and cities calculate their levy.
Property Tax Exemptions
There are a variety of exemptions that taxpayers can claim when it comes to property taxes, including exemptions for:
- Blind persons;
- Qualifying senior citizens;
- Qualifying surviving spouses, minor children, and elderly persons;
- Qualifying veterans;
- Religious and charitable organizations;
Massachusetts Estate Taxes
An estate tax is a tax that some states collect on the value of a person’s estate after they die. You may have to file Massachusetts estate taxes if you’re responsible for the estate of someone who has passed away. However, you won’t need to pay estate taxes if the estate is worth less than $1,000,000.
Estates are taxed at different rates depending on their size. You must file the return within nine months of the decedent’s death. You may also be eligible for federal credit for state death taxes depending on your particular situation.
Tips for Filing Taxes in Massachusetts
The deadline to file your Massachusetts tax return is April 15, the same as the federal income tax return filing deadline. You can file your tax return online or by mail, and you may be eligible to file your taxes online for free depending on your income level and other qualifying situations. There are also a variety of other online tax preparation software options available, many of which charge a moderate fee in exchange for using their services.
If you need help filing your taxes, you may want to consider seeking the assistance of a tax preparation professional. Whether you’ve never filed your taxes before, have a complicated tax situation, or just need guidance when it comes to the tax preparation process, qualified professionals can provide you the help you need along the way. Another advantage of using a tax professional is that they’re liable for any potential errors on your tax return.
Before you file your Massachusetts tax return, it’s a good idea to get all of your documents together and make sure you have everything in order. After you file, hold onto any important documents in case there are questions about your tax return or you are audited. You should have:
- Copies of the previous year’s tax returns;
- Your Social Security number;
- Records of your earnings, including W2 and/or 1099-MISC forms;
- Records of interest and dividends (1099 forms);
- Proof of health insurance;
- Records of tuition or student loan payments (1098-T);
- Records of Social Security benefits (SSA-1099);
- Records of pensions or annuities (1099-R);
- Unemployment compensation statements (1099-G);
- Child care expenses and provider information;
- Total rent paid;
- Receipts for items including medical expenses, mortgage interest, and charitable deductions.
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