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The personal income tax rates apply to the following taxpayers:
For the tax year 2016, the rates on taxable income are as follows:
Unlike Massachusetts bank interest where $100 or $200 may be excluded, the entire amount of Schedule B interest is subject to tax.
that are not included in Schedule B or Schedule D income is 5.1%.
Effective for tax years beginning on or after January 1, 2011:
In order to qualify for the lower rate, investments must have been made within 5 years of the corporation’s date of incorporation and must be in stock that generally satisfies the definition of “qualified small business stock” under IRC section 1202(c), without regard to the requirement that the corporation be a C corporation.
In addition, the stock must be held for 3 years or more and the investments must be in a corporation that:
As a result of the required holding period of 3 years or more for small business stock, tax year 2014 is the first year that the 3% rate was operative.
For tax years beginning on or after January 1, 2003, the Massachusetts tax rate on Schedule D long-term capital gains is:
Taxpayers have the option to pay a higher tax rate on certain types of income. Taxpayers may pay 5.85% as opposed to 5.1% on the following types of income:
Choosing to pay tax at the rate of 5.85% doesn’t apply to items of income taxed at 12%:
Schedule B taxable income will be taxed at the rate of 5.1% to the extent it does not:
Any remaining taxable income (i.e., any portion that exceeds Schedule B interest and dividends), will be taxed at the rate of 12%.
The Massachusetts personal income tax rate will remain at 5.1% in 2017 because Massachusetts failed to meet certain economic benchmarks set by the Legislature in 2002. The benchmarks are based on growth in tax revenues.
To meet the benchmarks, the tax revenue collected by Massachusetts would have had to increase by 2.5% year after year, adjusted for inflation.
Between fiscal years 2015 and 2016: