What’s new in Massachusetts for 2026: the surtax line moves, the federal deductions don’t cross over

The 2026 Massachusetts return will look almost exactly like the 2025 one. The rate is still 5%, short-term gains are still 8.5%, and the exemptions have not moved. Two things did change. The 4% surtax now starts at $1,107,750 of taxable income instead of $1,083,150, and the state formally refused, in a June 2026 law and a Department of Revenue release that followed it, to adopt the 2025 federal deductions for tips, overtime, seniors and car-loan interest. Those four deductions never had a place on Form 1 anyway, because Massachusetts does not start from federal taxable income. A server who owes no federal income tax on $14,000 of tips still owes Massachusetts $700 on them. The headline tax cut of the year, a ballot question to drop the rate from 5% to 4%, was struck from the ballot on June 18, 2026, so it is not happening for 2026 or 2027.

The rest of this article is the list, in the order it matters to a household: the surtax threshold, the federal conformity decisions, the June legislation, the health-insurance penalty, the form changes, the ballot, and the figures the Department has not yet published.

The surtax threshold: $1,107,750

The 4% surtax on taxable income over roughly a million dollars is indexed each year, and the Department of Revenue posted the 2026 line on December 30, 2025: $1,107,750, up from $1,083,150 for 2025. It is the only indexed figure on the Massachusetts return. The same line applies to every filing status, so a married couple filing jointly does not get twice the room; two earners who would each be well under the line alone can cross it together. Everyone subject to the surtax must file and pay electronically, a rule the 2026 Form 1-ES instructions repeat.

The 2025 federal law: what Massachusetts kept out

The federal tax law signed in July 2025 (Public Law 119-21) created four new deductions for individuals and changed a long list of business rules. Massachusetts answered in two documents. The June 2026 supplemental budget (House Bill 5470, St. 2026, c. 101, signed June 12, 2026) set the timetable for the business items, and Technical Information Release 26-4, dated June 23, 2026, published the item-by-item chart. The Department’s page on differences between Massachusetts and federal law, updated October 22, 2026, says the same thing in plain words.

TIR 26-4 is the document to cite for any “does Massachusetts follow this” question. The senior deduction does not appear in the TIR chart because it is a below-the-line federal deduction with no possible entry point on Form 1; the Department’s federal-differences page states the result directly.

Why does none of this require an add-back? Because Form 1 never saw the deductions. Massachusetts builds gross income from the Internal Revenue Code as it stood on January 1, 2024, sorts it into its own classes, and allows its own short list of deductions and exemptions. Federal AGI and federal taxable income are not lines on the return. A deduction that lives on Schedule 1-A of the federal 1040 simply has nowhere to go. The practical result is that a tipped or overtime-heavy worker’s Massachusetts tax for 2026 is the same as it would have been under the old federal law, and the withholding on the W-2 at 5% was right all along.

The June 2026 law: a brake on future federal changes

House Bill 5470 did one thing that will matter for years. Starting with tax years beginning on or after January 1, 2026, Massachusetts will no longer automatically pick up a federal Code amendment that applies to the calendar year in which Congress enacts it, or to earlier years, unless the Commissioner estimates its revenue effect at under $20 million. The 2025 federal law was retroactive to January 1, 2025 for many items, and the state found itself conforming to things it had never voted on. The brake prevents a repeat. For most households the brake is invisible; its effect is that a mid-year federal change will now usually wait a year in Massachusetts.

The same law set the business dates in the table above (section 179, 168(n) and 163(j) from 2027; 174A from 2026 without the catch-up), limited new opportunity zones to Massachusetts, and created a chapter 63E election letting a pass-through entity pay the 4% surtax at the entity level with a refundable credit to its members, starting with 2026. That election is the Massachusetts answer to the federal SALT cap for owners of S corporations and partnerships, and it is the one June item worth a conversation with a preparer before year-end. The Department has posted an alert saying it updated its filing guidance to match; it also said most taxpayers will not be affected, which is true.

The health-insurance penalty for 2026

Massachusetts has had its own individual mandate since 2007, and every resident filer attaches Schedule HC. TIR 26-1 (March 23, 2026) set the 2026 penalties for adults without minimum creditable coverage: nothing up to 150% of the federal poverty level, then $26 a month (150.1–200%), $51 (200.1–250%), $76 (250.1–300%), $117 (300.1–400%) and $211 a month above 400%, or $2,532 for a full year uninsured. For a single person, 400% of the poverty standard used for 2026 is $62,600; for a couple, $84,600. A married couple’s penalty is the sum of each spouse’s. A missing Schedule HC is the most common reason a Massachusetts refund stalls.

The forms

The draft 2026 Form 1, posted September 25, 2026, adds a checkbox for “Reporting digital assets,” mirroring the federal question. Lines 12 and 13, the old child-care and dependent-member deductions, remain “Reserved for future use”; they were replaced by the Child and Family Tax Credit in 2023 and are not coming back. The draft prints $1,700 on line 2c for the age-65 exemption, while the Department’s exemptions page (updated October 30, 2026) and the 2025 instructions both say $700. Until the final form and instructions are out, this publication uses $700 and flags it (verify); a reader who is 65 should check line 2c of the final form in January. The 2026 Form 1 instructions had not been posted as of this writing.

Still to come from the Department

• The 2026 Senior Circuit Breaker maximum credit, income limits and assessed-value cap. The 2025 figures are $2,820; $75,000 single, $94,000 head of household, $112,000 joint; and $1,298,000. The Department issues the new ones by release late in the year, and the draft 2026 Schedule CB still carries the 2025 numbers. See Massachusetts for retirees.
• The 2026 Form 1 instructions, which will settle the $700 question and print the No Tax Status and Limited Income Credit lines.
• Confirmation of the April 15, 2027 due date. Patriots’ Day falls on Monday, April 19 in 2027, so there is no reason to expect a shift.

Election day: one question struck, one defeated

The initiative to cut the income tax rate from 5% to 4% was removed from the November 3, 2026 ballot by the Supreme Judicial Court on June 18, 2026. The court held that the Attorney General’s summary was misleading because it told voters the long-term capital gains rate would stay the same when the measure would have cut it. The rate is 5% for 2026, and absent a new petition it is 5% for 2027.

Question 5, which voters rejected on November 3, 2026 by about 52% to 48%, would have rewritten the Chapter 62F revenue cap. Today the cap is last year’s cap plus three-year average wage growth; the question would base it on last year’s actual net revenue plus the same wage growth, and would count the 4% surtax toward the cap. Both changes make it more likely that the state collects more than the cap allows, which triggers refunds to taxpayers like the ones issued in 2022, when filers got back about 14% of their 2021 tax. With its defeat the existing cap stays as it is, and no rate, exemption or credit changes. The Legislature can still amend Chapter 62F on its own, and a Senate proposal to do so was pending in the fall of 2026. Question 6, which passed, dedicates part of the existing sales tax on sporting goods to a conservation fund and changes no rate. The other questions are not tax measures.