Short-Term Rental Taxes in Massachusetts: What Investors Need to Know in 2025
Massachusetts does NOT conform to federal bonus depreciation. You must add back federal bonus dep on your MA return and use standard MACRS depreciation. With high property values in Cape Cod, Martha's Vineyard, and Nantucket, the cost of the non-conformity is amplified. Plan with a MA CPA.
Massachusetts is home to some of the most valuable and consistently-performing STR markets in the Northeast: Cape Cod, Martha's Vineyard, Nantucket, the Berkshires, and the North Shore beach communities. The state has a 5% flat income tax, does not conform to federal bonus depreciation, and applies a layered rooms excise tax structure that reaches up to 11.7% of rental revenue in many markets.
Massachusetts State Income Tax on Rental Income
Massachusetts has a 5% flat income tax on most income, including net rental income. Massachusetts voters approved a 4% surtax on income over $1 million beginning in 2023 (the 'Millionaires Tax'), making the effective top rate 9% for high earners. For most STR investors, the applicable rate is 5%. Massachusetts begins with federal AGI and makes Massachusetts-specific modifications, including the depreciation addback.
Massachusetts Rooms Excise Tax Structure
| Market / Region | State Excise (5.7%) | Local Option (up to 6%) | Community Impact Fee | Estimated Total |
|---|---|---|---|---|
| Cape Cod (Barnstable County towns) | 5.7% | Up to 6% | Up to 3% | ~11.7%+ |
| Martha's Vineyard (Dukes County) | 5.7% | Up to 6% | Up to 3% | ~11.7%+ |
| Nantucket | 5.7% | 6% | Up to 3% | ~11.7%+ |
| Berkshires (Lenox, Stockbridge area) | 5.7% | 4–6% | varies | ~9.7–11.7% |
| Boston | 5.7% | 6% | varies | ~11.7%+ |
| North Shore (Gloucester, Rockport) | 5.7% | 4–6% | varies | ~9.7–11.7% |
Top Massachusetts STR Markets
Cape Cod: One of the most established seasonal vacation markets in the country. The 70-mile Cape attracts millions of summer visitors, with peak season running mid-June through Labor Day. Properties on the Cape range from modest cottages in Falmouth or Bourne to premium waterfront homes on Chatham or Wellfleet. The Cape Cod National Seashore and 560 miles of coastline sustain near-impossible occupancy rates in peak season.
Martha's Vineyard: An island accessible by ferry from Woods Hole or Hyannis. Martha's Vineyard has a national celebrity clientele and among the highest average nightly rates in Massachusetts. Property values on the Vineyard are extreme — multimillion-dollar estates are common. Cost segregation on a $2M+ property with $400,000 in bonus-eligible assets can generate $148,000+ in federal year-one savings.
Nantucket: The most premium of Massachusetts' island STR markets. Nantucket properties routinely command $1,000–$5,000+/night in peak season. Property values start at $1M+ for modest properties. The island's strict zoning and building regulations create a naturally supply-constrained market that supports strong ADRs.
Berkshires: Western Massachusetts' cultural and outdoor recreation destination. Tanglewood (summer home of the Boston Symphony Orchestra), MASS MoCA, and the natural scenery draw a mix of cultural tourism and outdoor recreationists. A more evenly-distributed year-round market than the Cape or islands, with fall foliage season a particular peak period.
Cost Segregation in Massachusetts: High-Value Properties
Massachusetts' combination of high property values and non-conformity to bonus depreciation creates a situation where the federal cost seg benefit is very large in absolute terms, while the state timing penalty is also meaningful. A $1.5M Vineyard property with $350,000 in cost seg deductions generates $129,500 in federal first-year savings (at 37%) — against a MA state timing penalty of approximately $17,500 (at 5%) in year one, which is recovered over the following 5 years.
Estimate Your Massachusetts STR Tax Savings
High MA property values amplify cost seg federal savings. The state timing penalty is real but dwarfed by the federal benefit. Get your free estimate.
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