Moving from Canada to Massachusetts: Flat 5% Tax, the Millionaire's Surtax, and Boston

Massachusetts charges a flat 5% state income tax, with an added 4% surtax on income above $1 million, for a combined top rate of 9%. There’s no city income tax anywhere in the state, including Boston. Boston is one of the largest biotech and pharma clusters in the world, a major finance hub, and home to a dense cluster of universities and hospitals, all of which pull in Canadian talent. There’s also a long-standing Canadian expat community in and around the city, built up over decades of academic and medical migration. The federal cross-border obligations, departure tax, RRSP, FBAR, are the same as any province-to-state move; what changes is the state layer.

How does Massachusetts compare to Canadian provinces?

Massachusetts’s 5% flat rate is well below every Canadian province’s top marginal rate, and below most provinces’ entry-level rates too. The surtax narrows that gap for high earners, but only above roughly $1 million.

Jurisdiction	Top rate	Notes
Ontario	~20.5% (with surtax)	On income above $220,000
BC	20.5%	On income above $252,752
Quebec	25.75%	On income above $126,000
Massachusetts	5% flat, 9% above ~$1.08M	Surtax threshold indexed annually

On $250,000 of employment income, Massachusetts produces about $12,500 in state tax, well under what the same income would generate in Ontario provincial tax. The gap closes somewhat for anyone clearing seven figures, since the surtax stacks the 4% on top of the flat 5% for every dollar above the threshold, not just the amount over $1 million in a graduated sense, it’s a flat additional rate on all income above the line.

What is the millionaire’s surtax, exactly?

In November 2022, Massachusetts voters approved a constitutional amendment (the “Fair Share Amendment”) adding a 4% surtax on annual income above $1 million, effective for tax year 2023 onward. The threshold is indexed for inflation each year; it sits at roughly $1.08 million for 2025 and adjusts again for 2026. Below the threshold, the flat 5% rate applies as it always has. Above it, the surtax adds 4 percentage points to every dollar over the line, producing a combined 9% marginal rate at the top.

This matters for anyone moving to Massachusetts with a liquidity event on the horizon, an equity vesting schedule, a business sale, a large capital gain. Timing income recognition around the surtax threshold, and around the Canadian departure date, is a real planning conversation, not a formality.

How does Massachusetts treat the RRSP?

Massachusetts starts from federal adjusted gross income. The RRSP treaty deferral under Article XVIII keeps the plan’s growth out of federal AGI during the deferral period, so Massachusetts doesn’t tax it either. When distributions come out, they land in federal AGI and flow through to the Massachusetts return at the flat 5% (or 9% if the distribution, combined with other income, pushes you over the surtax threshold in that year).

Massachusetts does not offer a broad retirement income exemption the way some states do, so RRSP/RRIF withdrawals are taxed like any other income once they hit the federal return. TFSA income is taxable federally and flows through the same way. The recommendation to close the TFSA before leaving Canada still applies; there’s no state-level upside to keeping it open.

What about Boston-area property taxes?

Massachusetts property taxes vary widely by town, and Boston itself is actually more moderate than many of its own suburbs because the city has a large commercial tax base subsidizing residential rates. The close-in suburbs, where a lot of relocating professionals actually buy, tend to run higher.

• Boston (city): effective rates roughly 0.5% to 0.7% of market value, kept low by the commercial base
• Cambridge, Somerville: similarly moderate, in the 0.5% to 0.7% range
• Brookline, Newton, Wellesley: 0.9% to 1.2%, reflecting high assessed values
• Suburbs further out (Metrowest, North Shore): 1.0% to 1.5%, varying by town

The effective rates aren’t shocking on their own, but Boston-area home values are high, so the dollar amount can be substantial. A $1.2 million home in Newton at a 1.0% effective rate is $12,000 a year. Compared to most Ontario municipalities (effective rates of 0.6% to 1.2% on generally lower assessed values), the dollar gap shows up more in the home price than the rate.

What about sales tax?

Massachusetts charges a 6.25% sales tax, with no local add-on anywhere in the state, so it’s the same rate everywhere. Groceries are exempt, and clothing is exempt up to $175 per item (anything above that threshold is taxed only on the excess over $175). This is a modest, predictable system compared to states that layer city and county sales tax on top of the state rate.

What happens on the Canadian side when I leave?

The standard departure sequence:

• Deemed disposition at fair market value of worldwide assets
• Final Canadian return from January 1 to the departure date
• Provincial tax at the rates of your province of residence on departure day
• T1161 and T1243 if applicable
• CRA non-resident notification
• RRSP left open, TFSA closed

What about business in Massachusetts?

Massachusetts has an 8% corporate excise tax rate (plus a small property measure component for some corporations), applied to net income. For pass-through entities (S-corps, partnerships, LLCs), income flows through to the individual return at the flat 5% rate, plus Massachusetts offers a pass-through entity elective excise tax at 5% that lets owners deduct the state tax paid on the federal return, working around the $10,000 SALT cap.

If you’re keeping a Canadian corporation while living in Massachusetts, the US federal reporting (Form 5471, GILTI, Subpart F) applies, and any US-source income from the corporation flows through to the Massachusetts return at the applicable rate. Nexus in Massachusetts (employees, property, or sales thresholds) can also trigger Massachusetts corporate excise tax on the corporation directly.

What about estate and inheritance tax?

Massachusetts has a state estate tax with an exemption of only $2 million, well below the federal exemption of $13.61 million, and it carries a cliff effect: once the gross estate exceeds $2 million, the tax applies to the entire estate, not just the amount above the threshold. Rates run from 0.8% to 16%. This is one of the lower estate tax exemptions among states that have one, and it catches a wider range of estates than the $4 million threshold in Illinois or the $2.193 million threshold in Washington. Massachusetts has no separate inheritance tax.

For a Canadian becoming a Massachusetts domiciliary, this threshold comes up faster than most people expect, particularly once a primary residence in the Boston area and any retirement accounts are added together. The cross-border estate planning guide covers the will structure and how the credit for state estate tax paid interacts with the federal return.

What should I do next?

The Canadian exit follows the standard departure checklist. On the Massachusetts side, the main planning items are the 4% surtax on income above roughly $1.08 million (a real issue for anyone with equity compensation or a business sale in the move year), the $2 million estate tax cliff, and Boston-area property values driving up the dollar cost of even moderate tax rates.

• Departure tax checklist, the full Canadian exit sequence
• RRSP and TFSA on a US move, federal treatment and reporting
• First US tax return after moving from Canada, the arrival-year mechanics
• Ontario to Florida taxes, the no-income-tax comparison
• Toronto to New York taxes, another high-cost, high-tax corridor
• Canada to Illinois taxes, a flat-rate state without a surtax
• State income tax for cross-border filers, how Massachusetts compares
• Moving from Canada to New Hampshire, the no-income-tax side of the Boston commuter corridor
• Moving from Canada to Rhode Island, the Providence corridor at lower cost than Boston

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.