Rental Property Taxes in Massachusetts (2026 Guide)

1. Property Tax in Massachusetts

Massachusetts property tax is municipal (set by each city/town, certified by DOR), with a statewide average effective rate around 1.1%. Proposition 2½ limits how fast a town’s total levy can grow — no more than 2.5% per year (plus new growth), with a hard ceiling of 2.5% of total assessed value.

• No residential exemption for rentals — cities that offer a residential exemption (Boston, for example) limit it to owner-occupied homes, so your rental pays the full rate.
• Classification — some municipalities shift more of the levy onto commercial/industrial property, though most use a single rate.

2. Massachusetts State Income Tax on Rental Income

Massachusetts taxes Part B income — wages, business, and rental — at a flat 5%, plus a 4% surtax on total taxable income over $1,107,750 (2026, inflation-adjusted). The surtax base includes capital gains, so a large property-sale gain can push you over the threshold and trigger the extra 4%.

• Capital gains — long-term gains are taxed at 5% (the Part B rate); short-term gains at 8.5%.
• No QBI deduction — Massachusetts does not conform to the federal 20% pass-through (§199A) deduction.

3. Bonus Depreciation Decoupling

Massachusetts does not allow federal bonus depreciation (§168(k)). You must add it back and run a separate regular-MACRS depreciation schedule for Massachusetts, keeping a state basis that differs from federal.

4. Deeds Excise (Transfer) Tax

Massachusetts charges a deeds excise stamp tax of about $4.56 per $1,000 of price (0.456%) statewide, paid by the seller. Barnstable County (Cape Cod) is higher — about $6.48 per $1,000 with the county/Land Bank surcharge. (A local-option transfer fee on high-value sales has been proposed but is not law as of 2026.)

5. LLC Fees ($500 — Among the Highest)

Massachusetts has one of the most expensive LLCs in the country: a $500 annual report (and a $500 formation fee), filed with the Secretary of the Commonwealth and due on the anniversary of your Certificate of Organization. Factor this fixed cost in before forming an LLC per property.

6. Rent Control

Massachusetts banned rent control statewide by 1994 ballot question (MGL c.40P), and it remains prohibited for 2026. (A 2026 initiative petition to allow local rent caps has been circulating, so this is worth re-checking after the November 2026 election.)

7. Security Deposit Rules (Among the Strictest in the US)

Massachusetts (MGL c.186 §15B) has some of the harshest deposit rules in the country, and the penalties are severe — handle deposits meticulously:

• Cap of one month’s rent.
• Statement of condition within 10 days of move-in.
• Separate interest-bearing account in a Massachusetts bank, beyond the reach of your creditors; interest paid annually at 5% or the actual lower bank rate.
• Return within 30 days of move-out.
• Treble damages — failing to use a separate account, to transfer the deposit to a buyer, or to return it within 30 days exposes you to triple the deposit plus interest, costs, and attorney’s fees.

8. How SheltrIQ Helps Massachusetts Landlords

SheltrIQ keeps the federal and Massachusetts sides aligned and surfaces the surtax math:

• Bonus-depreciation tracking — flags the MA add-back and runs the separate state depreciation basis.
• Disposition modeling — estimates the gain on a sale, where the 4% surtax can apply once you cross the threshold.
• AI Schedule E classification — keeps your federal return accurate, the base for your MA Part B income.
• Deadline reminders — keeps the $500 annual report and estimated-payment dates on your radar.