The thresholds
The threshold is indexed each year, so the often-quoted $1 million figure applied only to 2023. Only the part of taxable income above the threshold is subject to the extra 4%.
| Tax year | Threshold |
|---|---|
| 2023 | $1,000,000 |
| 2024 | $1,053,750 |
| 2025 | $1,083,150 |
| 2026 | $1,107,750 |
What income counts
The surtax is measured on the sum of your Part A, Part B and Part C taxable income: short-term gains, collectibles gains, interest and dividends (Part A), wages and other ordinary income (Part B), and long-term capital gains (Part C). A Part with a negative amount counts as zero rather than reducing the others.
Income that Massachusetts does not tax, such as interest on federal and Massachusetts obligations, is left out. Gain on the sale of a personal residence is included to the extent it is otherwise taxable in Massachusetts; there is no separate surtax exclusion for it.
- Wages, business income, rents: included
- Interest and dividends: included
- Short-term and long-term capital gains: included
- Taxable gain on selling your home: included
- Installment sale income: included in the year Massachusetts counts it
- Tax-exempt interest on federal and Massachusetts obligations: excluded
Married couples: one threshold per return
Starting with tax year 2024, married couples who file jointly for federal purposes must file jointly in Massachusetts unless an exception applies, and DOR says there is no exception for couples subject to the surtax, even if the spouses have different residency status. The threshold is not doubled for a joint return.
That produces a marriage penalty for high earners. Two unmarried people each with $900,000 of taxable income owe no surtax; a married couple with the same $1,800,000 on a joint return owes surtax on everything above the single threshold.
| Federal | Massachusetts | |
|---|---|---|
| Top rate | 37% | 5% plus 4% surtax (8.5% plus 4% on short-term gains) |
| Where the top rate starts | Above $626,350 single, $751,600 married filing jointly | Above $1,083,150 taxable income on any return, single or joint |
| Married couples | Joint brackets are wider than single | Must file jointly if joint federally; one threshold |
One-time gains: the real exposure
Many people who pay the surtax do not have million-dollar salaries. They have one year with a large gain: selling a business, a rental property, a block of stock or a home that has appreciated far beyond what the federal exclusion covers.
Because the surtax applies to the combined total, a year with $200,000 of wages and a $1,000,000 gain crosses the line even though no other year comes close. Timing, installment terms and whether spouses file jointly all affect the result, and most of those choices have to be made before the sale closes.
Illustrative example for 2025. A married couple in Easton, filing jointly, have $180,000 of wages and sell a business for a $1,220,000 long-term gain, for $1,400,000 of Massachusetts taxable income. The amount above the threshold is $1,400,000 − $1,083,150 = $316,850, and the surtax is 4% of that, or $12,674, on top of the regular 5% tax.
Planning before year-end
- 1.Estimate this year's Massachusetts taxable income, including any sale expected to close before 31 December.
- 2.Compare it with the threshold for the year: $1,107,750 for 2026.
- 3.If a sale may push you over, discuss timing and structure before signing, including whether an installment sale spreads income across years.
- 4.Review estimated payments: the surtax is part of the Massachusetts tax that the estimated tax rules measure.
Where we come in
We prepare returns that include the surtax schedule, and for clients expecting a large sale we work through the numbers before year-end, which is tax planning rather than preparation. Before we start, we give you a scope and a price in writing.
Figures on this page were checked against the IRS and Massachusetts sources listed alongside on 28 Sep 2026. They change — confirm the current amount before relying on one.
General information for owner-led businesses, not advice for your specific situation. Tax and accounting rules change, and how they apply depends on facts particular to your business. Talk to us — or to another qualified professional — before acting on anything here.
