Most Massachusetts income tax calculations are completed automatically based on information entered throughout your return. The Tax section is used to report additional taxes, penalties, interest, and use tax that may apply to your specific situation.
Program Entry
Massachusetts Return → Tax
Optional 5.85% Tax Rate Election
Massachusetts generally taxes most income at a 5% rate. However, taxpayers may choose an optional 5.85% tax rate for income that would otherwise be taxed at the standard rate.
In some situations, electing the higher rate can reduce a taxpayer's overall tax liability. This happens when the election increases the value of certain deductions or credits. Because every tax situation is different, it's a good idea to compare the results before making this election.
Keep in mind that the optional 5.85% rate does not apply to income taxed at special rates, such as short-term capital gains or collectibles.
Penalty on a Balance Due
If the Massachusetts Department of Revenue (DOR) assessed a penalty on unpaid taxes, enter the penalty amount in this section.
You'll usually find the penalty amount on a notice sent by the Massachusetts DOR. Only enter a penalty if it has already been assessed by the state.
Interest on a Balance Due
If the Massachusetts DOR charged interest on an unpaid tax balance, enter the interest amount here.
Interest charges are generally listed on a notice from the DOR and should only be entered when officially assessed.
Additional Tax on Installment Sales
Massachusetts may impose an additional tax when a taxpayer reports gain from an installment sale and pays tax on that gain over multiple years.
This additional tax is based on an interest charge tied to the deferred tax liability. The calculation is generally determined from information reported on the federal return and applies to certain installment sales that meet federal requirements.
Use Tax Due
You may owe Massachusetts use tax if you purchased taxable goods or services without paying Massachusetts sales tax at the time of purchase.
Common examples include:
- Online purchases where Massachusetts sales tax was not collected
- Purchases from out-of-state sellers
- Mail-order purchases
- Taxable items purchased while traveling outside Massachusetts and brought back into the state for use
Massachusetts use tax helps ensure that taxable purchases are treated the same whether they are made inside or outside the state.
Additional Information
- The optional 5.85% tax rate election does not benefit every taxpayer.
- Penalty and interest amounts should only be entered if they were assessed by the Massachusetts DOR.
- Keep copies of any notices used to determine penalty or interest amounts.
- Taxpayers reporting installment sale income should retain records supporting their calculations.
- Use tax generally applies when Massachusetts sales tax was not paid at the time of purchase.