After months of debate, the Massachusetts House and Senate passed a compromise tax relief bill, and Governor Healey signed it into law the afternoon of October 4th. Here are some of the highlights of the extensive $1 billion legislation:
1. Estate Tax
As of January 1, 2023, the threshold for the Massachusetts Estate Tax is increased to $2 million. Previously, any estate over $1 million would be subject to estate taxes on the entire estate. The new legislation eliminates this “cliff tax” by applying a credit so that the first $2 million of the estate is shielded from estate taxes.
2. Massachusetts Millionaires’ Tax Loophole
The so-called Massachusetts Millionaires’ Tax was enacted as of January 1, 2023, and imposes a 4% surtax on income over $1 million. Since this tax applies per return, many married couples might be able to minimize the tax by filing separately. The new law requires taxpayers in Massachusetts to file a joint state return in any year that they file a joint Federal return. This change applies as of January 1, 2024.
3. Short-Term Capital Gains Tax
The Massachusetts short-term capital gains tax rate is being decreased from 12% to 8.5% beginning in 2023. This rate applies to the sale of capital assets that are held for one year or less. The Massachusetts long-term capital gains tax rate remains at 5%, the same rate as for ordinary income.
If you have any questions about how the new law might affect you, please contact a member of our Estate and Financial Planning Team.
Alisa Kim O’Neil, JD, CTFA, AEP®, CDFA®:
[email protected] or 617-275-0313
Kathy Sablone, JD, AEP®:
[email protected] or 617-956-9712
Important
This article does not contain any legal or tax advice. You should always consult your attorney, accountant or other professional advisors before changing or implementing any tax, investment or estate planning strategy.
IRS Circular 230 Disclosure
Pursuant to IRS Regulations, we inform you that any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax related penalties or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
Professional Designation Minimum Requirements Disclosures
AEP® – Accredited Estate Planner®. Minimum requirements for the AEP® designation include active practice for a minimum of five years within the following disciplines: accounting; insurance and financial planning; law; philanthropy; and trust services with at least one-third of the individual’s time devoted to estate planning. Additionally, one or more of the following professional credentials: JD, CPA, CLU®, CFP®, CPWA®, CFA, CAP®, CSPG, CTFA, MSFS and MST is required, along with three professional references and current membership in an affiliated local estate planning council.
CDFA® – Certified Divorce Financial Analyst®. Minimum requirements for the CDFA® designation include a bachelor’s degree with three years of approved on-the job experience along with successful completion of the CDFA® examination consisting of 150 multiple choice questions. 30 hours of continuing education is required every two years.
CTFA – Certified Trust and Fiduciary Advisor. Minimum requirements for the CTFA designation include 5 years minimum experience in wealth management, a bachelor’s degree and passing the CTFA examination. 45 continuing education credits are required every three years.