Massachusetts Small Business Tax Guide — 2026

Massachusetts Income Tax

Massachusetts imposes a state income tax with rates of 5% flat rate + 4% surtax on income over $1M. Self-employed individuals, freelancers, and sole proprietors pay this tax on their net business income in addition to federal income tax and federal self-employment tax (15.3%).

Self-Employment in Massachusetts

Massachusetts has a 5% flat income tax plus a 4% "millionaire's tax" surtax on income over $1 million (total 9% on income above $1M). No separate state SE tax.

Estimated Tax Requirements

Quarterly estimated payments required if you expect to owe $400 or more. Standard federal due dates apply.

MassachusettsDeductions & Credits

• Massachusetts does not allow many federal deductions
• No standard deduction — uses personal exemption system
• Rent deduction: 50% of rent paid, up to $3,000
• Commuter deduction for public transit costs

Business Filing Fees

LLC: $500 formation + $500 annual report. Corporation: $275 formation + $125 annual report.

Key Facts About Massachusetts Taxes

• Massachusetts has the most expensive LLC costs in the nation ($500 formation + $500/year)
• The 4% "millionaire's tax" surtax on income over $1M took effect in 2023
• No standard deduction — uses a different deduction system than federal
• Rent paid is partially deductible (50%, up to $3,000)
• Estimated payment threshold is low at $400

Track Your Massachusetts Business Expenses

TaxTidy helps Massachusetts freelancers and self-employed individuals track every business expense with AI-powered receipt scanning. Snap a photo of any receipt and TaxTidy instantly extracts the vendor, amount, and tax category — then maps it to the correct IRS Schedule C line. At tax time, generate an audit-ready PDF report with all your deductions organized and totaled.

Frequently Asked Questions

Official source: Massachusetts Department of Revenue