State surtax

Some states add a surtax once income passes a high threshold. California adds 1% on income above $1 million (the Mental Health Services Tax). Massachusetts adds 4% above about $1 million. Because a big vest, exercise or IPO sale can push one year's income over the line, equity holders often pay a surtax in that single year even if their salary never would. Employers usually don't withhold for it, so it adds to the amount you owe at tax time.