The Massachusetts DOR says that short-term capital gains are taxed at 12%, but TaxCut says they are taxed at 5.3%. Is TaxCut wrong, or am I misunderstanding the DOR? The instructions for Form 1-ES say "12% income includes short-term capital gains, long-term capital gains on collecitbles...". Does it really mean short and long term gains on collectibles? It seems to say that short-term gains from mutual funds are taxed at 12%, but TaxCut says that all short term capital gains are taxed at 5.3%.
My question is are you sure you are properly reading the forms TaxCut is showing you and/or are properly understanding what is and is not a short-term gain?
Yes, it really means that. All short-term gains are taxed at 12%, as are long-term gains on collectibles.
Exactly what do you mean by "short-term gains from mutual funds"? If you mean short-term gains from YOU selling YOUR shares of the mutual fund, then yes, they are taxed at 12%. If you mean short-term gains realized by the FUND from sales of ITS holdings, those aren't short-term gains. By both federal and state tax law, they lose any capital character and become unqualified ordinary dividends (which, among other things, means they can't be directly offset by capital losses). As such, MA taxes them at 5.3% like all other dividends. All short-term gains which actually are short-term gains should be reported on MA Sched B in the appropriate places and they will eventually flow to the "Total 12% income" line on page two of Form 1.
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