On October 4, 2023, Governor Healey signed into law a $1 billion tax package that will modify a wide range of Massachusetts tax laws, including those related to the estate tax, the so-called “millionaires’ tax” and short-term capital gains rates. Key provisions to be aware of if you live, own real estate, or operate a business in Massachusetts include:

Estate tax

• Residents: There is now a $2 million exemption for every resident of Massachusetts, meaning that only estates that exceed $2 million will be subject to the estate tax and only on the portion of the estate that exceeds $2 million. This is a change from Massachusetts’ previous estate tax law that imposed a “cliff tax” on all estates exceeding $1 million — i.e., estates in excess of $1 million were taxed starting at the first dollar.
• Non-residents: For non-residents who own real or tangible property in Massachusetts, Massachusetts imposes an estate tax based on the proportional value of the property located in Massachusetts to the total gross estate. While non-residents also have a $2 million exemption, there may be instances when a Massachusetts estate tax is due even when the value of all property in Massachusetts is under $2M.
• Effective date: This law applies for all deaths occurring after January 1, 2023. For estates of decedents who died in 2023 that have already submitted an estate tax return based on the prior law, the personal representative may need to file for an abatement, pending guidance from the Massachusetts Department of Revenue.

Millionaires tax

• Tax return filings: Taxpayers must file a joint Massachusetts return in any year they file a joint Federal return. This law aims to close a perceived loophole allowing married couples to file separate Massachusetts returns to reduce or eliminate the impact of the 4% surtax on those with income exceeding $1 million but continue to file jointly for Federal income taxes.
• Effective date:  Applies to tax years beginning on or after January 1, 2024.

Short-term capital gains

• Reduction in tax rates: Tax rates for short-term capital gains, which are gains realized from the sale of capital assets held for one year or less, have been reduced from 12% to 8.5%. The long-term capital gains rate remains unchanged at 5%.
• Effective date:  January 1, 2023

Corporate income tax

• New tax calculation: The new law replaces an apportionment system that factored in property, payroll and sales when calculating the income tax owed by multi-state corporations doing business in Massachusetts with a simplified version that only considers a company’s sales within the state.
• Effective date: Takes effect January 1, 2025.

Caroline McKay is a senior wealth strategist representing CIBC Private Wealth in Boston. She has over 15 years of industry experience.