Overview of Massachusetts Taxes
Massachusetts is a flat tax state that charges a state tax rate of 5.1%. That goes for both earned income (wages, salary, commissions) and unearned income (interest, dividends). No Massachusetts cities charge their own local income tax.
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- Our Tax Expert
Jennifer Mansfield, CPA Tax
Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.
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Massachusetts Paycheck Quick Facts
How Your Massachusetts Paycheck Works
The size of your paycheck will depend, of course, on your salary or wages. But it will also depend on the allowances you claim, 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. Your employer also matches that contribution. Any earnings you make above $200,000 are subject to a 0.9% Medicare surtax, which is not matched by your employer.
We file income tax returns every spring, but we’re also paying our income taxes as we go, all year round. We do that by authorizing our employers to withhold money from our paychecks to put toward our income taxes. When you fill out a W-4 form you claim allowances, indicate your marital status and state whether you’re exempt from income tax withholding (you’re probably not). Your employer uses that information to calculate how much to withhold from your earnings every pay period. This is why you need to fill out a W-4 whenever you start a new job. You should also fill one out anytime your filing status changes or you experience a big life change, like having a child.
Note that withholding calculations changed for the 2018 tax year because of the tax plan that President Trump signed into law in December 2017. You should have seen any changes to your paycheck in early 2018. If you haven’t already, it’s a good idea to just double check that the information in your W-4 is correct.
If you put money in a 401(k), a health savings account (HSA) or a flexible spending account (FSA), that money will be taken from your earnings before taxes are applied, lowering your taxable income and saving you money in the process. The same is often true for the money you pay toward the premiums for employer-sponsored health, life and disability insurance.
Massachusetts Median Household Income
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In Massachusetts, your employer will withhold money from your paychecks to put toward your state income taxes. You can fill out Form M-4 and give it to your employer to indicate withholding exemptions.
The M-4 is like the W-4, but for Massachusetts state taxes. As on the W-4, you can indicate on your M-4 that you’d like your employer to withhold an additional amount of money. Like the W-4, the M-4 can be revised and filed again at any point during the year if your exemptions change (for example, if you gain a dependent). But if your allowances/exemptions would be the same on both the M-4 and W-4, you don’t have to fill out the M-4. You can just give your employer the W-4 and leave it at that.
If you earn money in Massachusetts, your employer will withhold state income taxes from your earnings, regardless of whether or not you are a Massachusetts resident. To report your Massachusetts income (and to be eligible for a refund from the Massachusetts Department of Revenue) you must file a non-resident income tax return in Massachusetts.
If you’re a Massachusetts resident but you work for a company in another state (that doesn’t do business in Massachusetts or have a Massachusetts office) your employer may or may not withhold Massachusetts income tax payments from your paychecks. It’s up to you to negotiate this with your employer. If your employer doesn’t withhold for Massachusetts taxes, you will have to pay those taxes in a lump sum at tax time or make estimated tax payments to the state (using form Form 1-ES). With estimated taxes you need to pay taxes quarterly based on how much you expect to make over the course of the year. The payment dates for Massachusetts estimated taxes are April 15, June 15, September 15 and January 15. If you work in another state and your employer does business or has offices in Massachusetts, your employer will withhold money from your paycheck to cover the taxes in the state where you work (if that state has income taxes). Your employer will subtract that amount from the amount due in Massachusetts state taxes and withhold the difference to cover your Massachusetts liability, too.
For those looking to move to Massachusetts, our Massachusetts mortgage guide is a good place to learn about getting a mortgage in the Bay State. It lays out the important information about rates and the different kinds of loans you will be deciding between.
How You Can Affect Your Massachusetts Paycheck
If you got slammed with a big tax bill last year, whether on your federal return or your Massachusetts state return, you have a couple of options to prevent it happening again. You can file a new W-4 and/or M-4 and claim fewer allowances. This means you’ll have more money withheld from each paycheck. You can also file a new W-4/M-4 and request a specific dollar amount of additional withholding from each paycheck. Both forms have a line where you can write in an additional dollar amount to withhold from each paycheck. If you aren’t sure how much to withhold, use the paycheck calculator to find your tax liability.
If you’re already living well within your budget, consider increasing your contributions to tax-advantaged accounts like a 401(k), HSA or FSA. Your contributions will come out of your earnings before payroll taxes are applied. If your company has an HR department, you can schedule a meeting to discuss your options. You may also be able to shelter money from taxes by enrolling in a commuter benefits program or by authorizing payroll deductions for contributions to a 529 college savings plan.
Massachusetts Top Income Tax Rate
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Most Paycheck Friendly Places
SmartAsset's interactive map highlights the most paycheck friendly counties across the country. Zoom between states and the national map to see data points for each region, or look specifically at one of the four factors driving our analysis: Semi-Monthly Paycheck, Purchasing Power, Unemployment Rate, and Income Growth.
Methodology Our study aims to find the most paycheck friendly places in the country. These are places in the country with favorable economic conditions where you get to keep more of the money you make. To find these places we considered four different factors: semi-monthly paycheck, purchasing power, unemployment rate and income growth.
First, we calculated the semi-monthly paycheck for a single individual with two personal allowances. We applied relevant deductions and exemptions before calculating income tax withholding. To better compare withholding across counties we assumed a $50,000 annual income. We then indexed the paycheck amount for each county to reflect the counties with the lowest withholding burden.
We then created a purchasing power index for each county. This reflects the counties with the highest ratio of household income to cost of living. We also created an unemployment rate index that shows the counties with the lowest unemployment. For income growth, we calculated the annual growth in median income over five years for each county and indexed the results.
Finally, we calculated the weighted average of the indices to yield an overall paycheck friendliness score. We used a one half weighting for semi-monthly paycheck and a one-sixth weighting for purchasing power, unemployment rate and income growth. We indexed the final number so higher values reflect the most paycheck friendly places.
Sources: SmartAsset, government websites, US Census Bureau 2017 5-Year American Community Survey, MIT Living Wage Study, Bureau of Labor Statistics