Boston Tax Tips: Education Credits and Biotech Benefits

Boston's economy revolves around education and biotech — two sectors with unique tax implications. Massachusetts has a flat 5% income tax rate, but the state offers several credits and deductions that can significantly reduce your burden if you know where to look.

Massachusetts Flat Tax Advantage

At 5%, Massachusetts's flat income tax is lower than many progressive states' top rates. For high earners in biotech and finance, this is favorable compared to California (13.3%) or New York (10.9%). However, the 4% millionaire's surtax on income over $1M adds a significant layer.

Student Loan Interest Deduction

With Boston's concentration of recent graduates, the student loan interest deduction is crucial. You can deduct up to $2,500 in student loan interest on your federal return, and Massachusetts allows a similar deduction on your state return.

Research and Development Credits

If you work for a biotech startup, your employer may qualify for R&D tax credits that can indirectly benefit you through higher compensation. Massachusetts offers a 10% research credit that many Kendall Square companies leverage.

Commuter Benefits in Boston

The MBTA is a lifeline for Boston commuters. Pre-tax transit benefits of up to $315/month reduce your taxable income by $3,780 annually. Combined with the 5% state tax savings, that is nearly $700 in additional annual savings.

Boston Occupational Privilege Tax

Boston charges a small Occupational Privilege Tax of $5.75 per month for employees working in the city. Your employer also pays $4.00 per month. While minimal, it is unique to Boston and worth noting on your pay stub.

Outdoor Lifestyle Tax Benefits

Boston offers excellent outdoor recreation opportunities. The state's conservation easement tax credit for land preservation means many recreational activities and state parks are taxpayer-subsidized, stretching your after-tax dollars further.