Bank Gap by State
The Bank Gap in Massachusetts
Massachusetts taxes most savings interest at a flat 5.0% rate, but a separate 4% surtax on income above $1 million means very high earners face a materially higher effective rate — worth knowing even though it doesn't touch a typical saver's interest income.
Last reviewed August 7, 2026 · SwitchWize Research Desk
Before MA tax
$1,005/yr
on a $25,000 balance
After MA 5% tax
$955/yr
recoverable by switching
On a $25,000 balance, the gap is about $1,005 a year before tax. After Massachusetts's 5% top income-tax rate on the additional interest, you keep about $955. Because Treasury interest is exempt from Massachusetts income tax, routing that cash through a state-tax-exempt Treasury vehicle can recover most of the difference.
Estimated Bank Gap by balance
| Balance | Current earnings | Better-fit earnings | Estimated Bank Gap | After MA tax |
|---|---|---|---|---|
| $5,000 | $19 | $220 | $201 | $191 |
| $10,000 | $38 | $440 | $402 | $382 |
| $25,000 | $95 | $1,100 | $1,005 | $955 |
| $50,000 | $190 | $2,200 | $2,010 | $1,910 |
| $100,000 | $380 | $4,400 | $4,020 | $3,819 |
Estimates over 12 months at 0.38% current APY and 4.40% better-fit APY. The "After MA tax" column applies MA's 5% top income-tax rate to the additional interest; federal tax applies on top and is not shown. Example only — your result depends on your balance, rates, and time horizon.
Why Massachusetts changes the math
Massachusetts applies a flat 5.0% rate to ordinary interest income, plus an additional 4% surtax on the portion of total income above $1 million (the state's so-called 'Millionaire's Tax'), which can push the effective top rate on interest well above 5% for very high earners. Treasury interest stays exempt from the state tax at every income level.
The Boston metro carries some of the highest living costs in the country, which sizes a typical Massachusetts emergency fund — and the Bank Gap it's exposed to — well above the national norm.
Cost of living in Massachusetts is among the highest in the country, driven by the Boston metro, which shapes how large an emergency fund needs to be and therefore how many dollars the Bank Gap quietly costs on idle cash.
Because Massachusetts taxes savings interest but not Treasury interest, the highest after-tax yield is not always the highest headline APY. Run your tax profile through the short-term savings tool to see whether a Treasury bill or government money market fund beats a taxable account for you.
Open the short-term savings toolFrequently asked questions
Does Massachusetts tax high-yield savings account interest?
Is a high-yield savings account worth it in Massachusetts?
Are T-Bills better than a HYSA for Massachusetts savers?
Your personal Bank Gap
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Calculate my Bank GapEducational information, not tax or financial advice. State tax rules are summarized at a high level and depend on your full situation. Rates are illustrative of current market conditions and should be confirmed with the provider. Confirm tax treatment with a qualified professional.