Capital Gains Tax in Massachusetts (2026)
Massachusetts taxes long-term capital gains at 5% and short-term gains at 8.5% — plus a 4% surtax on income over $1,107,750 — all stacked on top of the federal 0/15/20% tax and the 3.8% NIIT. Run the combined number below.
Reviewed & updated · 2026 tax-year figures · Federal + Massachusetts state
Massachusetts is unusual — it taxes short-term gains harder than long-term ones. Under M.G.L. c. 62 §4, long-term gains are taxed at 5% and short-term gains at 8.5%. On top of that, a 4% surtax applies to the portion of your total taxable income — capital gains included — above $1,107,750 for 2026 (Art. 44 surtax). These stack on the federal 0/15/20% (IRC §1(h)) and 3.8% NIIT. A high earner tripping the surtax can pay near 32.8% combined on a long-term gain.
Net proceeds $178,150$21,850
Show our work federal + MA, step by step
Estimates only, for the 2026 tax year. Not tax advice. The Massachusetts long-term rate (5%), short-term rate (8.5%) and 4% surtax are set by M.G.L. c. 62 §4 and §5A; the $1,107,750 surtax threshold is inflation-indexed. Federal bracket thresholds and standard deductions are projected 2026 amounts, marked est. and owner-verifiable against the final IRS release.
How does Massachusetts tax capital gains?
Massachusetts is one of the few states that taxes short-term gains at a higher rate than long-term ones. Under M.G.L. c. 62 §4, long-term capital gains are taxed at 5% — the same rate as ordinary Part B income — while short-term gains (assets held one year or less) are taxed at 8.5%. So the holding period matters at the state level here in a way it does not in most flat-tax states.
On top of the base rates sits the 4% surtax voters added in 2022 (Mass. Const. Amend. Art. 44). It applies to the slice of your total taxable income — wages, interest, and capital gains together — above $1,107,750 for 2026, a threshold indexed to inflation. Because a large one-time gain (a business exit, a Boston triple-decker sale, a block of RSUs) can push a household over that line for a single year, the surtax turns a 5% long-term rate into an effective 9% on the portion of the gain above the threshold.
How does Massachusetts stack on top of federal?
The two systems run in parallel and the amounts are added — Massachusetts does not replace or absorb the federal tax. For a long-term gain, you owe:
- Federal: 0%, 15%, or 20% depending on where the gain stacks on your taxable income, under IRC §1(h);
- Federal NIIT: an extra 3.8% on net investment income once MAGI passes $200,000 (single) / $250,000 (joint), under IRC §1411; and
- Massachusetts: 5% on a long-term gain (8.5% short-term), plus 4% on any part of the gain that sits above the $1,107,750 taxable-income threshold (§4, §5A).
Add those together and a top-bracket Massachusetts resident with a long-term gain that trips the surtax can pay roughly 20% + 3.8% + 5% + 4% ≈ 32.8%. A short-term gain is worse on both sides: the federal rate jumps to ordinary income (up to 37%) and Massachusetts charges 8.5% instead of 5%. The calculator above computes each layer separately.
What are the 2026 Massachusetts capital gains rates?
Massachusetts applies different rates by holding period, plus the surtax. Here is how the pieces combine.
| Massachusetts capital gains | Rate |
|---|---|
| Long-term capital gain · M.G.L. c. 62 §4(b) | 5% |
| Short-term capital gain · §4(a) | 8.5% |
| Collectibles (long-term) | 12% |
| Local / municipal income tax on gains | None |
| Surtax on taxable income over $1,107,750 · §5A | +4% |
How this calculator works & where the numbers come from
No black box. The federal side uses the same unit-tested engine as our main calculator: net gain = proceeds − basis; classify by holding period; for long-term gains, subtract the standard deduction and stack the gain across the 0/15/20% bands per IRC §1(h); add 3.8% NIIT where modified AGI crosses the §1411 threshold; short-term gains are computed as the true marginal difference in ordinary tax. The Massachusetts side taxes the gain at 5% if long-term or 8.5% if short-term (M.G.L. c. 62 §4), then adds a 4% surtax on the portion of the gain that, stacked on your other taxable income, sits above the $1,107,750 threshold (§5A). The two results are summed.
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Primary sources (linked, not just named)
- M.G.L. c. 62 §4 — rates of tax (5% / 8.5%)
- Massachusetts 4% surtax on taxable income
- Massachusetts Dept. of Revenue — individual income tax
- Massachusetts Department of Revenue
- 26 U.S.C. §1(h) — federal capital gains rates
- 26 U.S.C. §1411 — 3.8% NIIT
- 26 U.S.C. §121 — home-sale exclusion
- IRS Topic No. 409 — Capital Gains and Losses
- IRS Publication 550 — Investment Income
Massachusetts capital gains tax, answered
Does Massachusetts have a separate capital gains tax rate?
Yes — two of them. Long-term gains are taxed at 5% and short-term gains at 8.5% (M.G.L. c. 62 §4). A 4% surtax also applies to total taxable income above $1,107,750 for 2026, so the marginal rate on a large long-term gain can reach 9%.
How much is capital gains tax in Massachusetts for 2026?
Long-term: 5% of the gain. Short-term: 8.5%. Add 4% on any portion above the $1,107,750 threshold. Federally a long-term gain is taxed at 0/15/20% (IRC §1(h)) plus 3.8% NIIT for high earners; a top earner tripping the surtax can pay near 20% + 3.8% + 5% + 4% ≈ 32.8% combined. Use the calculator above for your exact figure.
How does Massachusetts capital gains tax stack on top of federal?
They are computed separately and summed. The federal side taxes long-term gains at 0/15/20% and adds 3.8% NIIT for high earners. Massachusetts adds 5% (long-term) or 8.5% (short-term), plus a 4% surtax over $1,107,750. Your total tax is federal + NIIT + Massachusetts.
What is the Massachusetts 4% millionaire surtax?
A 4% surcharge on the portion of taxable income above $1,107,750 for 2026 (Mass. Const. Amend. Art. 44; M.G.L. c. 62 §5A). Capital gains count toward that income, so a large one-time gain can trigger it, taking the top slice of a long-term gain to 9% (5% + 4%). The threshold is inflation-indexed each year.
Does the 3.8% federal NIIT apply to Massachusetts residents?
Yes — the NIIT is federal and applies in every state. Once modified AGI exceeds $200,000 (single) or $250,000 (married filing jointly), the 3.8% surtax under IRC §1411 hits the lesser of your net investment income or the amount over the threshold. It is separate from both the Massachusetts 5%/8.5% rate and the state 4% surtax.
Does Massachusetts conform to the $250k/$500k home-sale exclusion?
Yes. Massachusetts follows the IRC §121 exclusion of up to $250,000 ($500,000 married filing jointly) on a primary residence, so only gain above the exclusion is taxed — at the 5% long-term rate. That remaining gain still counts toward the $1,107,750 surtax threshold. See our home-sale hub for the mechanics.
Compare Massachusetts with other state hubs
Massachusetts’s 5% long-term rate is moderate, but its 8.5% short-term rate and 4% surtax make it bite harder on quick flips and big one-time gains. It is lighter on long-term gains than California (up to 13.3%) and New York (over 10%), heavier than flat-tax Illinois (4.95%), and far above the no-income-tax states like Texas and Florida. Every state page combines the same unit-tested federal engine with that state's own rules, so you always see the full combined number, not just half of it. The main Capital Gains Tax Calculator lets you fold any state's rate into your federal receipt.