Property Management Taxes In Massachusetts

This guide covers the taxes that actually apply to a property management company operating in Massachusetts, and to the rental income it handles on behalf of owners. Every figure below is tied to the statute, agency rule, or published guidance that sets it, so you can confirm a rate or deadline before acting on it.

State Income Tax On Rental And Management Income

Massachusetts applies a flat 5 percent rate to most income, including net rental income and property management fees, plus a 4 percent surtax on the portion of taxable income above an inflation-indexed threshold. That surtax is the item that surprises owner-clients in a year they sell a property, because a large capital gain can push a normally modest return over the line. Pass-through entities may elect a 5 percent entity-level excise that gives qualified members a refundable 90 percent credit.

• A 5 percent rate applies to most Massachusetts income, including rental income, below the surtax threshold. An 8.5 percent rate applies to short-term capital gains and a 6 percent effective rate applies to long-term gains on collectibles. (Massachusetts DOR, Massachusetts Tax Rates)
• Massachusetts personal income taxpayers pay an additional 4 percent surtax on the portion of taxable income that exceeds an annual threshold. Only the amount above the threshold is subject to the surtax. (Massachusetts DOR, Massachusetts 4% Surtax on Taxable Income)
• The 4 percent surtax threshold is $1,083,150 for tax year 2025 and $1,107,750 for tax year 2026. The threshold is adjusted annually for inflation. (Massachusetts DOR, Massachusetts 4% Surtax on Taxable Income)
• An eligible pass-through entity may elect to pay an excise on its qualified income taxable in Massachusetts at a rate of 5 percent. The election is made on Form 63D-ELT. (Mass. Gen. Laws ch. 63D, Section 2; Massachusetts DOR, Elective Pass-through Entity Excise)
• Each qualified member of an electing pass-through entity is allowed a credit equal to 90 percent of its distributive share of the PTE excise paid, and that credit is refundable, so excess credit is treated as an overpayment the member can request back. A qualified member is a natural person, estate or trust subject to Massachusetts personal income tax as a shareholder, partner or beneficiary. (Massachusetts DOR, TIR 22-6: Pass-through Entity Excise; Massachusetts DOR, Elective Pass-through Entity Excise)
• Partnerships that own or operate Massachusetts rental property file the Massachusetts Partnership Return, Form 3, and must file it electronically for tax periods ending on or after December 31, 2021, regardless of net taxable income or loss. (Massachusetts DOR, Partnerships; 2025 Instructions for Massachusetts Partnership Return Form 3)
• Massachusetts allows a renter to deduct one-half of the rent paid for a principal residence in Massachusetts, up to a maximum deduction of $3,000 per year, available regardless of age or income. Managers are frequently asked about this by tenants at year end. (Massachusetts DOR, Deductions on Rent Paid in Massachusetts)
• For tax years beginning on or after January 1, 2024, the Massachusetts personal income tax generally conforms to the Internal Revenue Code as amended and in effect on January 1, 2024, and as a general rule does not conform to later federal changes. Federal and Massachusetts treatment of rental activity can therefore diverge. (Massachusetts DOR, Differences Between MA and Federal Tax Law for Personal Income)

Sales Tax On Rent: What Applies And What Does Not

Long-term residential rent in Massachusetts is not subject to sales tax. There is no sales tax on a residential lease at all. What Massachusetts taxes instead is short-term lodging, through a separate room occupancy excise under Chapter 64G, and since July 1, 2019 that excise reaches short-term rentals of 31 days or less, not just hotels. The all-in rate stacks: 5.7 percent state, up to 6 percent local (6.5 percent in Boston), a 2.75 percent convention center fee in six cities, a 2.75 percent Cape Cod and Islands Water Protection Fund charge, and a community impact fee of up to 3 percent. Occupancy agreed in advance to exceed 90 consecutive days under a written agreement is exempt, which is why a normal 12 month lease falls entirely outside this regime.

• Massachusetts does not impose sales tax on residential rent. Lodging is instead taxed under the separate room occupancy excise, which applies to room rentals of 90 days or less in hotels, motels, bed and breakfast establishments and lodging houses, and, beginning July 1, 2019, to short-term rentals of property for 31 days or less. (Massachusetts DOR, Room Occupancy Excise Tax; TIR 19-3)
• Where the duration of occupancy has been agreed to in advance, will exceed 90 consecutive calendar days, and is evidenced by a written agreement, the occupancy is not subject to the excise, unless the rental in fact terminates before the 90th day. A standard written residential lease of a year is therefore outside the excise entirely. (830 CMR 64G.1.1, Massachusetts Room Occupancy Excise)
• Where there is no agreement on the duration of occupancy, each day of occupancy is subject to the excise, and after the 90th consecutive calendar day passes any tax collected must be returned or credited to the occupant. (830 CMR 64G.1.1, Massachusetts Room Occupancy Excise)
• The state room occupancy excise rate is 5.7 percent, which is a 5 percent base rate plus an uncodified 0.7 percent surtax. (Massachusetts DOR, Room Occupancy Excise Tax)
• Massachusetts cities and towns may adopt a local room occupancy excise of up to 6 percent, and up to 6.5 percent in Boston. (Massachusetts DOR, Room Occupancy Excise Tax; Massachusetts Division of Local Services, Local Option Excise Taxes)
• An additional 2.75 percent convention center financing fee applies in Boston, Worcester, Cambridge, Springfield, West Springfield and Chicopee. (Massachusetts DOR, Room Occupancy Excise Tax)
• In Barnstable, Dukes and Nantucket counties an additional 2.75 percent may be charged for the Cape Cod and Islands Water Protection Fund, beginning July 1, 2019, and it currently applies in all Barnstable County municipalities. (Massachusetts DOR, Room Occupancy Excise Tax)
• Beginning July 1, 2019, for short-term rentals only, cities and towns may charge a community impact fee of up to 3 percent where an operator has more than one property in that locality, or where the operator is renting an owner-occupied two or three family house on a short-term basis. This is a local option adopted municipality by municipality. (Massachusetts DOR, Room Occupancy Excise Tax; Division of Local Services, Adopting a Local Option Community Impact Fee on Short-Term Rentals)

Property Tax

Massachusetts property tax is entirely municipal. The local board of assessors values property at 100 percent of full and fair cash value and the city or town sets a rate expressed per $1,000 of assessed value, all inside the limits Proposition 2 1/2 places on how much a community can levy. The exemption that matters for rental owners is the local-option residential exemption, which requires the applicant to occupy the property as a domicile, so it never applies to a tenant-occupied unit.

• Assessments in Massachusetts are by law 100 percent of full and fair cash value, commonly referred to as market value, and are made by the municipal board of assessors. (Massachusetts Division of Local Services, RE18RC07: Property Assessments, Valuation and Taxation)
• Proposition 2 1/2, enacted in 1980 and effective in fiscal 1982, sets a levy ceiling limiting the property tax levy to 2.5 percent of the full and fair cash value of all taxable real and personal property in the community absent further community action. (Massachusetts Division of Local Services, Levy Limits: A Primer on Proposition 2 1/2)
• Under Proposition 2 1/2 a community's levy limit may grow each year by only 2.5 percent of the prior year's levy limit, plus new growth, plus any voter-approved overrides or exclusions. (Massachusetts Division of Local Services, Proposition 2 1/2 and Tax Rate Process)
• Tax rates are set annually by each city and town and are published by the Division of Local Services in its Tax Levies, Assessed Values and Tax Rates tables, which is where a manager should verify the current rate for a given municipality and property class. (Massachusetts Division of Local Services, FY2026 Tax Levies, Assessed Values and Tax Rates)
• A local board or council may grant a residential exemption, an open space class discount and a small commercial exemption. An applicant for the residential exemption must occupy the property as his or her domicile on July 1, so the residential exemption does not apply to a tenant-occupied investment property. (Massachusetts Division of Local Services, Property Assessments, Valuation and Taxation; Chapter 7, Property Tax Exemptions module)
• Massachusetts municipalities issue property tax bills on either a quarterly or a semiannual billing schedule, so the payment dates a manager must calendar depend on which schedule the city or town uses. (Massachusetts Division of Local Services, Property Taxes and Proposition 2 1/2 Training and Resources, Property Tax Billing and Billing Schedules)

Withholding And Employer Taxes

A Massachusetts management company with employees has four separate payroll obligations rather than two: DOR income tax withholding at 5 percent, DUA unemployment insurance on the first $15,000 of wages, Paid Family and Medical Leave contributions, and the employer medical assistance contribution. On the owner side, Massachusetts has no courthouse withholding on real property sales the way Maryland does, but pass-through entities do have withholding duties for nonresident members.

• Massachusetts income tax withholding on wages is computed using DOR's Circular M withholding tables, published at the 5 percent rate and effective January 1, 2026 for the current tables. (Massachusetts DOR, Massachusetts Circular M Income Tax Withholding Tables at 5.0%, Effective January 1, 2026)
• The Massachusetts unemployment insurance taxable wage base is $15,000 in wages per employee per calendar year. (Massachusetts DUA, Employer contributions to unemployment)
• Under UI Tax Rate Schedule D in effect for 2025, the newly subject employer rate was 2.13 percent for non-construction employers and 5.45 percent for construction employers. DUA sends annual rate notices by January 31 each year, and an employer receives a true experience rating in its fourth year of subjectivity. (Massachusetts DUA, Learn about UI contribution rates; Mass. Gen. Laws ch. 151A, Section 14)
• Quarterly employment and wage detail reports and contributions to DUA are due by 3 p.m. on April 30 for Quarter 1, July 31 for Quarter 2, October 31 for Quarter 3 and January 31 for Quarter 4. (Massachusetts DUA, Learn about employer contributions to DUA)
• For 2026, employers with 25 or more covered individuals have a total Paid Family and Medical Leave contribution of 0.88 percent of eligible wages. Up to 100 percent of the family leave contribution (0.18 percent) may be withheld from employees, and up to 40 percent of the medical leave contribution (0.28 percent) may be withheld from employees, with the employer paying the remaining 0.42 percent. (Massachusetts Department of Family and Medical Leave, PFML employer contribution rates and calculator)
• Employers with fewer than 25 covered individuals have an effective PFML contribution rate of 0.46 percent of eligible wages. Small employers are not required to pay the employer share of the medical leave contribution and are only responsible for remitting amounts withheld from covered individuals' wages. Many property management firms fall under the 25 person line. (Massachusetts Department of Family and Medical Leave, PFML employer contribution rates and calculator)
• PFML follows the unemployment statute in determining what counts as wages, so employers base PFML contributions on the same wage base they report to DUA. (Massachusetts Department of Family and Medical Leave, Wage contributions and reporting for Paid Family and Medical Leave)
• Massachusetts imposes a separate Employer Medical Assistance Contribution (EMAC) on covered employers, administered through DUA alongside unemployment insurance. (Massachusetts DUA, Employer medical assistance contribution (EMAC))
• Pass-through entities with nonresident members have Massachusetts withholding obligations on those members' Massachusetts source income, which is the mechanism that reaches out-of-state owners holding rental property through a partnership or S corporation. (Massachusetts DOR, Tax Guide for Pass-Through Entity Withholding)

Federal Obligations

Federal treatment does not vary by state. Rental income and expenses go on Schedule E of Form 1040, residential buildings are depreciated over 27.5 years while land is not depreciated, and a management company that pays vendors and distributes rent in the course of business has 1099 reporting duties. The dollar threshold for those 1099s changed for payments made after December 31, 2025.

• Rental real estate income and expenses are reported on Schedule E (Form 1040), Supplemental Income and Loss. (IRS, Publication 527, Residential Rental Property)
• Residential rental buildings are depreciated under MACRS over a 27.5 year recovery period. Land is not depreciable, so the basis must be allocated between land and improvements. (IRS, Publication 527, Residential Rental Property, Depreciation of Rental Property)
• Payments of $600 or more during the calendar year in the course of a business to a person who is not an employee for services, including payments to an attorney, are reported on Form 1099-NEC. For payments made after December 31, 2025, the threshold is $2,000, with inflation adjustment in calendar years after 2026. (IRS, Instructions for Forms 1099-MISC and 1099-NEC)
• Rents paid in the course of a business are reported on Form 1099-MISC under the same test: $600 or more during the calendar year, rising to $2,000 for payments made after December 31, 2025. (IRS, Instructions for Forms 1099-MISC and 1099-NEC)
• The change comes from statutory amendments made by Public Law 119-21. The prior $600 threshold for Form 1099-MISC, Form 1099-NEC and Form W-2 had been in place since 1954 and was not indexed to inflation. (IRS, Publication 1099, General Instructions for Certain Information Returns)
• Rules on who must file information returns, furnishing recipient statements and filing deadlines are consolidated in IRS Publication 1099, General Instructions for Certain Information Returns. (IRS, Publication 1099 (2026), General Instructions for Certain Information Returns)

Filing Deadlines

Massachusetts entity returns follow the federal rhythm, with partnerships due in the third month and corporations on the corporate excise calendar. Trust account style taxes, meaning sales tax and room occupancy excise, run monthly and are due on the 30th day after the period covered, which is later than most states and easy to misremember as the 20th. Larger collectors also owe an advance payment mid-month.

• Massachusetts partnership returns on Form 3 are due annually by the 15th day of the third month after the close of the partnership's taxable year, calendar or fiscal. (Massachusetts DOR, Partnerships; 2025 Instructions for Massachusetts Partnership Return Form 3)
• Partnerships are granted an automatic 6 month extension, making the extended due date for a 2025 calendar year Form 3 September 15, 2026. (Massachusetts DOR, Massachusetts DOR Tax Due Dates and Extensions)
• Business corporations file the corporate excise return on Form 355 for the calendar year, per the DOR annual due dates and extensions calendar and the Form 355 instructions. (Massachusetts DOR, 2025 Instructions for Massachusetts Corporation Excise Return Form 355)
• Form 63D-ELT, the elective pass-through entity excise return, is due at the same time the eligible PTE's Form 3, Form 355S, Form 63-FI or Form 2 is due, and the excise is due and payable on the entity's original timely filed return. (Massachusetts DOR, Elective Pass-through Entity Excise; 2025 Form 63D-ELT Instructions)
• Sales tax and room occupancy excise returns are due monthly, on or before the 30th day following the month represented by the return. (Massachusetts DOR, Massachusetts DOR Tax Due Dates and Extensions; Form RO-2 Instructions, Room Occupancy Tax Return)
• An advance payment requirement applies to taxpayers with more than $150,000 in cumulative tax liability in the prior year, and it covers sales and use tax, sales tax on services, meals food and beverage tax, room occupancy excise and marijuana retail taxes. (Massachusetts DOR, 830 CMR 62C.16B.1, Advance Payments of Sales and Use Tax and Room Occupancy Excise)
• DUA quarterly wage detail reports and contributions are due April 30, July 31, October 31 and January 31, by 3 p.m. on the due date. (Massachusetts DUA, Learn about employer contributions to DUA)

Registration And Recordkeeping

Massachusetts is strict about short-term rental registration and it is per property, not per company. Operators and intermediaries register on MassTaxConnect, each individual property gets its own registration certificate, and every registered property appears in a public state registry. There is also a $1 million liability insurance floor per property. Records are retained under the general DOR retention rule, which runs to the end of the assessment statute of limitations, generally three years.

• All operators and intermediaries must register with DOR on MassTaxConnect. Operators register each property they offer for occupancy with the Commissioner, entering a list of their properties and receiving a registration certificate for each one. (Massachusetts DOR, Room Occupancy Excise Tax)
• DOR sends a registration certificate to businesses registered to collect sales, meals or rooms taxes, and certificates must be displayed at the location where the tax is being collected. (Massachusetts DOR, AP 616: Registration Information, Sales Tax, Meals Tax, Room Occupancy Excise, Withholding Tax, and Other Miscellaneous Excises)
• Short-term rental operators must maintain $1 million in liability coverage per property. (Massachusetts DOR, Room Occupancy Excise Tax; Commonwealth of Massachusetts, Short-Term Rental Insurance)
• DOR maintains a Public Registry of Lodging Operators listing registered operators and properties, so a management company's short-term rental listings are publicly verifiable. (Massachusetts DOR, Public Registry of Lodging Operators)
• Records must be kept as long as their contents are material in the administration of Massachusetts tax law. At a minimum, unless the Commissioner consents in writing to earlier destruction, records must be preserved until the statute of limitations for making additional assessments for the period has expired, generally three years after the due date of the return or the date the return was actually filed, whichever is later. (830 CMR 62C.25.1, Record Retention)
• Operator and intermediary records must be produced for review by the Commissioner in the course of an audit, and the retention period is the one specified in 830 CMR 62C.25.1. (830 CMR 64G.1.1, Massachusetts Room Occupancy Excise)
• Massachusetts partnership returns and schedules must be filed electronically for tax periods ending on or after December 31, 2021, regardless of the partnership's net taxable income or loss. (Massachusetts DOR, TIR 21-9: Expansion of Certain Electronic Filing and Payment Requirements)

Recent Changes Worth Tracking

• Effective Tax year 2026: The Massachusetts 4 percent surtax threshold rose from $1,083,150 for tax year 2025 to $1,107,750 for tax year 2026 under the annual inflation adjustment. (Massachusetts DOR, Massachusetts 4% Surtax on Taxable Income)
• Effective January 1, 2026: Paid Family and Medical Leave contribution rates for 2026 are 0.88 percent of eligible wages for employers with 25 or more covered individuals and an effective 0.46 percent for employers with fewer than 25 covered individuals. (Massachusetts Department of Family and Medical Leave, PFML employer contribution rates and calculator)
• Effective January 1, 2026: DOR published updated Circular M income tax withholding tables at 5.0 percent, which payroll systems must be using for wages paid on or after the effective date. (Massachusetts DOR, Massachusetts Circular M Income Tax Withholding Tables at 5.0%, Effective January 1, 2026)

Tax is one half of Massachusetts compliance. See our guide to Massachusetts property management laws and regulations for licensing, trust account, and disclosure rules.

Keeping This Straight

Tax rates and thresholds move more often than most operators expect, and the figures circulating in older articles go stale quickly. Check any rate against its citation before you quote it to an owner, and re-check them at the start of each tax year.

This guide is a starting point for professional managers, not tax or legal advice. For a specific filing, work with a CPA familiar with Massachusetts rental property, and confirm current figures with the Massachusetts Department of Revenue (DOR), with the Department of Unemployment Assistance (DUA) for unemployment insurance, the Department of Family and Medical Leave for PFML, and municipal boards of assessors for property tax or the IRS.

Sources

Every fact above is drawn from one of the official sources below.

• Massachusetts DOR, Massachusetts Tax Rates, Massachusetts Department of Revenue
• Massachusetts DOR, Massachusetts 4% Surtax on Taxable Income, Massachusetts Department of Revenue
• Mass. Gen. Laws ch. 63D, Section 2; Massachusetts DOR, Elective Pass-through Entity Excise, Massachusetts General Laws, Chapter 63D Section 2
• Massachusetts DOR, TIR 22-6: Pass-through Entity Excise; Massachusetts DOR, Elective Pass-through Entity Excise, Massachusetts Department of Revenue, TIR 22-6
• Massachusetts DOR, Partnerships; 2025 Instructions for Massachusetts Partnership Return Form 3, Massachusetts Department of Revenue
• Massachusetts DOR, Deductions on Rent Paid in Massachusetts, Massachusetts Department of Revenue
• Massachusetts DOR, Differences Between MA and Federal Tax Law for Personal Income, Massachusetts Department of Revenue
• Massachusetts DOR, Room Occupancy Excise Tax; TIR 19-3, Massachusetts Department of Revenue
• 830 CMR 64G.1.1, Massachusetts Room Occupancy Excise, Massachusetts Department of Revenue, 830 CMR 64G.1.1
• Massachusetts DOR, Room Occupancy Excise Tax; Massachusetts Division of Local Services, Local Option Excise Taxes, Massachusetts Department of Revenue, Division of Local Services
• Massachusetts Division of Local Services, RE18RC07: Property Assessments, Valuation and Taxation, Commonwealth of Massachusetts, Division of Local Services
• Massachusetts Division of Local Services, Levy Limits: A Primer on Proposition 2 1/2, Commonwealth of Massachusetts, Division of Local Services
• Massachusetts Division of Local Services, Proposition 2 1/2 and Tax Rate Process, Commonwealth of Massachusetts, Division of Local Services
• Massachusetts Division of Local Services, FY2026 Tax Levies, Assessed Values and Tax Rates, Commonwealth of Massachusetts, Division of Local Services
• Massachusetts Division of Local Services, Property Taxes and Proposition 2 1/2 Training and Resources, Property Tax Billing and Billing Schedules, Commonwealth of Massachusetts, Division of Local Services
• Massachusetts DOR, Massachusetts Circular M Income Tax Withholding Tables at 5.0%, Effective January 1, 2026, Massachusetts Department of Revenue, Circular M
• Massachusetts DUA, Employer contributions to unemployment, Massachusetts Department of Unemployment Assistance
• Massachusetts DUA, Learn about UI contribution rates; Mass. Gen. Laws ch. 151A, Section 14, Massachusetts Department of Unemployment Assistance
• Massachusetts DUA, Learn about employer contributions to DUA, Massachusetts Department of Unemployment Assistance
• Massachusetts Department of Family and Medical Leave, PFML employer contribution rates and calculator, Massachusetts Department of Family and Medical Leave
• Massachusetts Department of Family and Medical Leave, Wage contributions and reporting for Paid Family and Medical Leave, Massachusetts Department of Family and Medical Leave
• Massachusetts DUA, Employer medical assistance contribution (EMAC), Massachusetts Department of Unemployment Assistance
• Massachusetts DOR, Tax Guide for Pass-Through Entity Withholding, Massachusetts Department of Revenue
• IRS, Publication 527, Residential Rental Property, Internal Revenue Service
• IRS, Instructions for Forms 1099-MISC and 1099-NEC, Internal Revenue Service
• IRS, Publication 1099, General Instructions for Certain Information Returns, Internal Revenue Service
• Massachusetts DOR, Massachusetts DOR Tax Due Dates and Extensions, Massachusetts Department of Revenue
• Massachusetts DOR, 2025 Instructions for Massachusetts Corporation Excise Return Form 355, Massachusetts Department of Revenue
• Massachusetts DOR, Elective Pass-through Entity Excise; 2025 Form 63D-ELT Instructions, Massachusetts Department of Revenue
• Massachusetts DOR, 830 CMR 62C.16B.1, Advance Payments of Sales and Use Tax and Room Occupancy Excise, Massachusetts Department of Revenue, 830 CMR 62C.16B.1
• Massachusetts DOR, AP 616: Registration Information, Sales Tax, Meals Tax, Room Occupancy Excise, Withholding Tax, and Other Miscellaneous Excises, Massachusetts Department of Revenue, AP 616
• Massachusetts DOR, Room Occupancy Excise Tax; Commonwealth of Massachusetts, Short-Term Rental Insurance, Commonwealth of Massachusetts
• Massachusetts DOR, Public Registry of Lodging Operators, Massachusetts Department of Revenue
• 830 CMR 62C.25.1, Record Retention, Massachusetts Department of Revenue, 830 CMR 62C.25.1
• Massachusetts DOR, TIR 21-9: Expansion of Certain Electronic Filing and Payment Requirements, Massachusetts Department of Revenue, TIR 21-9