Massachusetts Millionaire's Tax
Massachusetts Voters Approve the "Millionaire's Tax"
Last week, Massachusetts voters approved a constitutional amendment, commonly referred to as the Fair Share Amendment or the Millionaire's Tax, to add a 4% surtax on income over $1 million. We are still waiting for more information from the Department of Revenue. In the meantime, we want to share what we know so far.
- This additional income tax will be in effect starting from January 1, 2023. You will report it on your 2023 income tax return which is due in April 2024.
- Only the taxable income that exceeds $1,000,000 is subject to the additional 4%. For example, if your Massachusetts taxable income is $1,500,000 then $1,000,000 will be subject to tax at 5% and $500,000 will be subject to tax at 9% (5% + the additional 4%).
- The $1,000,000 taxable income threshold will be increased every year to keep up with inflation.
- This is a tax on income, not the value of your assets. For example, if your 401(k) or IRA has a value over $1,000,000, you will not be taxed on that amount. However, if you take distributions from those assets that cause your taxable income to exceed $1,000,000, then the surtax will apply to the income in excess of $1,000,000.
It is important to contact your trusted advisors and CPAs. A proactive tax planning strategy can help to mitigate the impact of this new 4% surtax on income greater than $1,000,000.
This material is generic in nature. Before relying on the material in any important matter, users should note date of publication and carefully evaluate its accuracy, currency, completeness, and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances.
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