Finally, and after much anticipation, the Massachusetts tax reform package was signed by Governor Maura Healey on Wednesday, October 4, 2023.
Amid the provisions:
- Estate Tax Reform: Establishes a non-refundable credit of $99,600 for each estate, which will have the effect of eliminating all estate taxes for estates up to $2 million applicable for deaths occurring after January 1, 2023. This now eliminates the so-called “cliff tax.”
- Dependent Credit: Increases the tax credit for a dependent child, disabled adult or senior from $180 to $310 for 2023. The credit increases to $440 for taxable years beginning in 2024.
- Renter’s Deduction: Increased from $3,000 to $4,000.
- Senior Circuit Breaker: Doubles the credit from $1,200 to $2,400.
- Short-term capital gain rate: Reduced from 12% to 8.5%.
- Millionaires’ Tax Loophole: The new law requires taxpayers to file a joint Massachusetts return any year a joint Federal return is filed (effective as of January 1, 2024). This intends to eliminate the loophole created when the Millionaires’ Tax was enacted at the beginning of 2023 (i.e., a 4% surtax on income over $1 million). Because the surtax applies per return, married couples would be able to file separately to avoid it. This will no longer be the case.
The estate tax changes are effective for estates created January 1, 2023, or later. An interesting point: since the Massachusetts estate tax return is due nine months from the date of death, many personal representatives may had already filed the Massachusetts estate tax return this year for an estate valued at under $2 million. If a return was already filed, (pending on any guidance or clarification from the MA Department of Revenue), personal representatives of an estate should consider filing an abatement.
Reforming the Massachusetts tax code has been more frustrating than when it first appeared in the summer of 2022. Luckily, the legislature, although late, has not failed to provide relief this year.