Mass‐balance estimates of the polar ice sheets presently rely on static ice masks to identify the area under investigation. However, the vintage of available ice masks can differ by more than a decade and the resolution of the imagery used to delineate ice extent can differ by an order of magnitude, despite evidence of ongoing ice‐sheet retreat. We show that using a fine‐resolution, time‐varying ice mask significantly improves mass‐balance estimates of the northwestern sector of the Greenland Ice Sheet and affects interpretation of local crustal uplift. Accounting for ice margin retreat using a time‐varying ice mask between 2003–2015 results in 1.0–6.8% less ice‐sheet mass loss relative to assuming one of several existing static ice masks. This indicates that mass‐balance estimates that use a static ice mask will progressively overestimate mass loss where the ice sheet is predominantly retreating, meaning a negative bias on mass‐balance. This trend is anticipated to be amplified in a future warming scenario unless updated ice masks are incorporated. For altimetry‐derived mass‐balance estimates, this ice‐mask‐induced bias approaches the magnitude of the ice‐sheet‐wide uncertainty presently associated with spatiotemporal variability in modeled firn compaction. Further, at five GNET stations, the ice‐mask‐induced bias is equivalent to 5–15% of the modeled uplift due to elastic deformation. Given present and projected negative trends in Greenland Ice Sheet mass‐balance and areal extent, we conclude that studies of its mass‐balance should begin incorporating dynamic, periodically updated, fine‐resolution ice masks. This methodological refinement will reduce bias in estimates of both ice‐sheet mass‐balance and crustal uplift.