Massachusetts for NRI families: 5% tax, the 4% surtax, 183-day rule and the estate tax

Boston and its suburbs are home to many NRI engineers, doctors and researchers. Massachusetts has a few rules that differ from the federal return and from most other states. The figures are for tax year 2025 unless stated. The state revenue website blocked our automated access, so the rates and rules below come from search summaries of its pages and from secondary sources, and should be checked against the current Form 1 instructions.

Who is a Massachusetts resident

The state treats you as a resident for a year if you are domiciled in Massachusetts, or if you keep a permanent place of abode in the state and spend more than 183 days there in the year. The days need not be consecutive. A permanent place of abode is a dwelling you continually maintain, whether owned or rented, and it includes one your spouse owns or leases.

A resident is taxed on income from everywhere, including India. A non-resident is taxed only on Massachusetts-source income. Someone who is resident for part of the year is a part-year resident and is taxed as a resident for that part.

Rates

For 2025 the main rate is a flat 5% on most income, including wages, interest, dividends and long-term gains. Short-term capital gains, on assets held one year or less, are taxed at 8.5%. Gains on collectibles are taxed at 12%.

On top of this there is a 4% surtax on income above a threshold that is adjusted each year for inflation. The threshold is $1,083,150 for 2025 and $1,107,750 for 2026, according to the state's tax rates page as shown in search results and its 2026 estimated tax instructions. So the rate above that level is 9% on ordinary income and 12.5% on short-term gains. A single large RSU vest or share sale can push a family over the line in one year.

There is no standard deduction. The personal exemption is $4,400 for a single filer and $8,800 for joint filers, plus $1,000 for each dependent. We confirmed the single figure only from the state page and the joint figure from a legislative document.

RSUs and moving in or out

A non-resident is taxed on pay for work done in Massachusetts. For stock options, the state's regulation (830 CMR 62.5A.1) uses a method based on time in Massachusetts, and a 2007 bar article says it runs from grant to exercise, which differs from the federal rule. We found nothing specific on RSUs. A court case in 2025, Welch v. Commissioner of Revenue, held that a non-resident's gain on a stock sale was Massachusetts-source because it was tied to work in the state, and an appeal was reported as pending. Keep a record of days worked in each state and read the equity guide and the state moves guide.

No credit for Indian tax

Massachusetts gives a credit on Schedule OJC for income tax paid to other US states. For foreign countries the state's guidance, as quoted in search summaries, excludes everything except Canada and its provinces. So Indian tax gives no Massachusetts credit, even where you claim it on the federal Form 1116. See the foreign tax credit guide.

Property tax

Property tax is set by each city or town. Proposition 2.5 limits how much a community's total levy can rise each year, but it does not cap the bill on your house, which can still rise with value and with new local spending. Rates differ greatly between towns. Compare the actual annual bill when you choose a home.

Estate tax

Massachusetts has its own estate tax. For deaths on or after 1 January 2023 the threshold is $2 million, with a credit of up to $99,600 that removes the tax for estates at or below that figure. Above $2 million the tax applies, and it can apply to a non-resident who owns real estate or tangible property in Massachusetts, in proportion to that property. For a family with a home and savings in the state, this is a lower threshold than the federal one. See the gifts and inheritance guide.

Payroll: Paid Family and Medical Leave

Employees fund part of the state paid leave programme through payroll. For 2026 the total contribution is 0.88% of wages for employers with 25 or more covered workers. The employee share is 0.46%, made up of all of the family leave part (0.18%) and 0.28% of the medical leave part. Contributions apply up to the Social Security wage cap, which one source gave as $184,500 for 2026. We could not read the state's own page, so confirm on your pay slip. A reported 2027 change to the split is unconfirmed.

Forms and dates

Residents file Form 1. Part-year residents and non-residents file Form 1-NR/PY and divide income between the two periods on its Schedule R/NR. The 2025 return was due on 15 April 2026, and the same date applies each year.

Massachusetts looks at your home and your days in the state. A surtax year, a part-year move with stock vesting, or a Massachusetts home kept after you leave are all points where a US CPA should review the return before filing.