Updated October 7, 2026. Quick answer: Generally no, if you qualify for the federal exclusion. The state’s tax expenditure budget describes the exemption of capital gain on a principal residence “for up to $250,000 of capital gain (or $500,000 if filing jointly)”. Gain above it is taxed at 5.00%, and a sale of $1,000,000 or more triggers closing paperwork and, for a nonresident seller, possible withholding.
Massachusetts tax on home sale profit at a glance
| Item | What the documents say |
|---|---|
| Profit on your main home | Follows the federal exclusion: gross income starts from federal gross income, and the state budget office describes the section 121 exemption |
| Rate on gain above the exclusion | Flat 5.00% on long-term gains and other income, plus a 4% surtax on income over $1,107,750 for 2026 |
| Collected at the sale | Sales of $1,000,000 or more (closings on or after November 1, 2025): Form NRW and Transferor’s Certification; for a nonresident seller, withholding 4% of price, or 5% of gain if elected, unless reduced by certification |
| Source | MA Executive Office for Administration and Finance; Massachusetts Legislature; MA Department of Revenue |
What the Massachusetts documents say
Chapter 62, section 2 of the General Laws says “Massachusetts gross income shall mean the federal gross income” with adjustments, and the state’s Tax Expenditure Budget describes the home-sale item as an exemption “for up to $250,000 of capital gain (or $500,000 if filing jointly)”. The budget office’s description is not a Department of Revenue ruling.
The Department of Revenue’s rate page lists “Long term capital gains from dividends, interest, wages, and other income 5.00%”, and adds that “For income exceeding $1,107,750, there is an additional surtax of 4%” for tax year 2026.
What the federal exclusion requires
Most state answers start here. The statute says “Gross income shall not include gain from the sale or exchange” of property that, during the five years before the sale, you owned and used as your principal residence for periods adding up to two years or more. The limit is “shall not exceed $250,000”, or $500,000 for a husband and wife who make a joint return and meet the statute’s conditions. See CMG’s home sale taxes page and exclusion calculator.
A worked example at a $400,000 gain
An illustration, not a return: a married couple in Massachusetts sells their main home with a gain of $400,000 and meets the federal ownership and use tests. The gain is below the $500,000 joint exclusion, so $0 of it is taxable and Massachusetts taxes $0 of it. As a second illustration, computed below, suppose the gain were $600,000. The amount above the exclusion would then be $100,000 and, computed as that excess times 5.00%, the tax at the flat rate would be $5,000, before the surtax, which applies only to income over $1,107,750.
What is collected at the sale
For closings on or after November 1, 2025 with a gross sales price of $1,000,000 or more, the Department’s rules require the withholding agent to file Form NRW and the seller to give a Transferor’s Certification. The Department says that if the seller is a nonresident or a business with no continuing Massachusetts presence, the agent “may also be required to withhold tax”; the rate “is 4% of the gross sales price”, or 5% of the estimated net gain if elected, plus an additional 4% on the amount over the surtax threshold, and it can be reduced or eliminated by certification, including “the “principal residence” exemption”.
What changes in 2026
Massachusetts: the surtax threshold is $1,107,750 for tax year 2026, up from $1,083,150 for 2025, as the Department prints it.
What the documents do not say
- The conformity statement comes from the state budget office and the statute, not from a Department of Revenue document. The Department’s rate and withholding pages could only be read through Wayback copies because mass.gov blocks scripted downloads. The statute prints a different rate than the Department’s page; this page uses the Department’s printed figure.
Common mistakes
- Assuming tax is withheld from every seller at $1,000,000 or more; Form NRW is filed on those sales, but withholding is for a nonresident seller.
- Forgetting the 4% surtax on income over the threshold in a year with a very large gain.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the sale.
Related: home sale taxes, state tax on home sale profit, how Massachusetts taxes capital gains, Massachusetts retirement taxes, and home sale exclusion calculator.
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Answer againSources
- Tax Expenditure Budget 1.021 Exemption of Capital Gains on Home Sales (Governor FY25 Budget): https://budget.digital.mass.gov/govbudget/fy25/tax-expenditure-budget/personal-income-tax/exclusions-from-gross-income/1-021/
- M.G.L. c. 62 section 2 (Massachusetts Legislature): https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter62/Section2
- Massachusetts Tax Rates (Wayback Machine copy of mass.gov DOR page; live page returned 403): https://web.archive.org/web/2026/https://www.mass.gov/info-details/massachusetts-tax-rates
- Filing and Withholding Rules: Real Estate Sales of $1 Million or More (Wayback Machine copy of mass.gov DOR page; live page returned 403): https://web.archive.org/web/2026/https://www.mass.gov/info-details/withholding-requirement-sale-of-real-estate-by-non-residents
- M.G.L. c. 62 section 4 (Massachusetts Legislature): https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter62/Section4
- 26 U.S.C. 121, Exclusion of gain from sale of principal residence (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title26/html/USCODE-2023-title26-subtitleA-chap1-subchapB-partIII-sec121.htm
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.