Massachusetts
Taxes and business formation • USA 2025–2026
LLC in Massachusetts
Corporation in Massachusetts
Tax system of Massachusetts
Income Tax
Massachusetts used a single flat personal income tax rate, but since 2023 has added an additional rate for high-income residents. The base rate is 5% and applies to all types of taxable income (wages, dividends, business income, rental income, etc.). In addition, a Millionaire's Tax was introduced in 2023 — a 4% surtax on income above $1 million, which brings the effective rate for high-income individuals up to 9%.
Sales Tax
Massachusetts has a uniform sales tax rate of 6.25%, and local jurisdictions are not allowed to add additional taxes, which makes the state's tax system predictable. The tax applies to most goods and to certain services (including rentals, short-term accommodations, digital goods, and software). Clothing under $175 is exempt, and tax is charged only on the amount above that threshold. Determining the taxable base and the correct sales tax rate can be quite complex and requires a professional approach and knowledge of state law. Our firm provides services for obtaining a Sales Tax Certificate and for preparing and filing the Sales and Use Tax Return. We advise business owners on all matters related to this tax, including registration, calculation, and reporting.
Property Tax
Property tax in Massachusetts varies by municipality. The average effective rate is about 1.14% of assessed value, but in some cities and suburbs of Boston it can be significantly higher due to high real estate prices.
Business Taxes
Massachusetts levies a Corporate Excise Tax, which consists of two parts: a profit tax of 8% on taxable income, and a minimum tax on net assets of 0.26% (but no less than $456 per year). C-corporations are fully subject to the tax, while S-corporations pay tax based on income and type of income, with rates ranging from 1.93% to 2.95% when revenue exceeds $6 million. LLCs and partnerships, unless they elect corporate taxation, pass income through to the owner level. All companies doing business in Massachusetts are required to file an Annual Report. The filing deadline for corporations is within 2.5 months after the end of the fiscal year; for LLCs, it is annually on the anniversary of the company's registration in the state. If you have difficulty filing the Annual Report, our firm provides services for preparing and filing this report.
Excise Taxes
Massachusetts levies excise taxes on fuel, alcohol, tobacco products, electronic cigarettes, and automobiles. In addition, a Room Occupancy Tax applies to short-term real estate rentals, similar to Airbnb. Any activity involving alcohol or tobacco requires licenses and specialized reporting.
Favorable Tax Conditions
Despite the high overall tax burden, Massachusetts offers a stable and clear tax system, which is important for long-term business planning. The absence of local surcharges on sales tax simplifies calculations, and tax credits (for example, for job creation, R&D, and investment in green technology) help reduce the corporate tax burden. For technology startups and biotech companies, the state offers extensive tax incentives, particularly through the MassTech and Mass Life Sciences Center programs. This makes Massachusetts attractive for high-tech and research-driven businesses.
Compared to Other States
Massachusetts has one of the higher tax burdens in the country, especially after the introduction of the Millionaire's Tax. Unlike Florida and Texas, which have no income tax, all types of income are taxable here. At the same time, the sales tax rate is moderate and uniform across the state, with no additional surcharges as in California, Illinois, or New York. The Corporate Excise Tax is higher than in some Southern states but comparable to New York or California. Massachusetts does not levy a franchise tax as a separate charge, but the tax on corporate assets serves a similar function. The state also imposes a tangible personal property tax on businesses, including computers, office equipment, and production assets, which requires inventory tracking and reporting at the municipal level.
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