There are a few tax law chanegs for Massachusetts taxpayers that you may benefit from:
- This first change does not take effect until 2024. As a result of the new MA Millionaires tax assessing a 4% tax on tax return income in excess of one million dollars for MA taxpayers, MA taxpayers must complete their tax return with the same filing status for MA taxes and federal taxes. Prior to this new law, a “loophole” existed allowing taxpayers to file their federal tax return jointly while filing their MA tax return as married filing separately. This strategy would allow some married high-income earners to take advantage of the benefits of filing jointly for federal tax purposes while avoiding or reducing the tax hit from the newly enacted MA millionaires 4% surtax by filing separately on the MA tax return. Under the new rule in MA if taxpayers file their federal tax return jointly, then they must also file their MA tax return jointly. However, with this new filing status law not taking effect until the 2024 tax year, taxpayers that may be impacted will have a one-year window for the 2023 tax year allowing them to benefit by claiming different filing statuses between their federal and MA tax returns in order to reduce or avoid the newly implemented 4% millionaires tax.
- The second new piece of legislation is effective beginning with the 2023 tax filing year. MA taxpayers will see a reduction in the short-term capital gains tax rate lowering this tax from 12% to 8.5%. The tax rate on long-term capital gains in MA remains unchanged at 5%.
- The third major change impacts MA estate taxes. Prior to 2023, the estate tax was implemented on any MA estate that exceeded one million dollars in value and with the tax being upon the entire value of the decedent’s estate. Beginning in 2023, for any taxpayer that dies in 2023 or later, the new estate tax is assessed on MA estates with a value in excess of two million dollars. And the first two million dollars is now exempt from the estate tax; thus, an exemption of two million dollars is now applied to the value of the estate when calculating the MA estate tax.
- A few other changes include increasing the cap on the MA rental deduction for MA renters from $3,000 to $4,000 and doubling the maximum allowed “senior circuit-breaker credit” for qualifying elderly taxpayers from $1,200 to $2,400.