Massachusetts tax overhaul raises estate tax exemption, closes ‘millionaire’ loophole

Nov 27, 2023 | Tax

Ryan J. McDonell, CPA, MSA
Tax Manager

Gov. Maura Healey recently signed a $951 million tax package that will impact businesses and individuals in the Commonwealth by raising the estate tax exemption and closing a potential “millionaire tax” loophole. Some of the most significant measures included in the legislation are highlighted below:

  • Doubles the state’s estate tax exemption to $2 million through a uniform credit of $99,600 beginning in 2023. This eliminates the tax for estates valued at $2 million or less and reduces the tax for estates valued at more than $2 million.
  • Requires married taxpayers filing joint federal tax returns to also file joint Massachusetts returns beginning in 2024. This measure closes a potential loophole in the new Massachusetts “millionaire tax.”
  • Changes the corporate excise tax apportionment formula to single-sales factor, as opposed to current three-factor based on property, payroll, and sales beginning in 2025.
  • Modifies the sourcing of financial institution receipts from investment and trading activities beginning in 2025 to be based on a fraction of Massachusetts receipts from financial activities over total receipts, excluding income from investment assets.
  • Lowers the state’s short-term capital gain rate to 8.5% from 12% beginning in 2023.
  • Increases the maximum personal rental deduction to $4,000, up from $3,000 beginning in 2023.
  • Raises the tax credit for dependents from $180 to $310 in 2023 and to $440 in 2024, and removes the two-dependent cap.
  • Doubles to $2,400 the maximum senior circuit breaker credit beginning in 2023.
  • Increases the Massachusetts earned income tax credit to 40% from 30% of the federal credit beginning in 2023.

 If you have questions about how these measures may affect you, contact your G.T. Reilly advisor.

Author

Ryan J. McDonell, CPA, MSA, MSLT

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