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.