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Thursday, October 26, 2023

Massachusetts Tax Reform Includes Estate Tax Changes

On October 4, 2023, Massachusetts Governor Maura T. Healey today signed into law Massachusetts' first tax cuts in more than 20 years.  The tax relief package changes how the Massachusetts estate tax is calculated.  More specifically, the new law increases the Massachusetts asset threshold at which the estate tax is imposed from one million dollars to two million dollars and eliminates the “estate tax cliff.”  Therefore, by establishing a non-refundable estate tax credit of $99,600.00, only assets in excess of two million dollars will be subject to the tax, effectively eliminating the “estate tax cliff.”

Previously, Massachusetts taxed estates with assets in excess of one million dollars and calculated the tax due on the entire value of the estate.  With the new law in place, effective for the estates of decedents dying after January 1, 2023, only assets in excess of the two million threshold are subject to the state-level estate tax.  For estates valued in excess of two million dollars, the estate tax will continue to be calculated based on a graduated scale with tax rates ranging from 7.2% to 16%.  Also, of importance, unlike the federal estate tax exemption, the Massachusetts two million dollar estate tax exemption is not indexed for inflation, which means that it will remain at the same two million dollar level unless future changes are made to the law.


While this is certainly welcome news for many Massachusetts residents, the new law actually just moves Massachusetts from having the lowest state estate tax threshold (previously tied with Oregon) to having the third-lowest threshold (now higher than only Oregon and Rhode Island).

If you have any questions regarding this story or estate planning, please feel free to contact the Law Offices of Samuel S. Reidy for a free consultation.

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