Massachusetts Millionaire’s Tax

On Election Day, November 8th, Massachusetts voters approved Question 1 to amend the state constitution and establish an additional 4% surtax on taxable income in excess of $1 million dollars.

Millionaire’s Tax Facts

  1. This additional income tax will be effective for tax years beginning January 1, 2023, which will be reported on returns due in April 2024.
  2. The $1,000,000 taxable income threshold will be adjusted annually for inflation using the same method that the IRS follows.
  3. 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%.
  4. This is a tax on income and not the value of a particular asset. So, if your 401(k) or IRA has a value over $1,000,000 this does not matter unless your annual distribution exceeds this amount.
  5. Similarly, only the taxable gain from the sale of a home or business would be subject to this tax, and not the gross selling price.

We expect more information from the Department of Revenue in the coming weeks.

How May We Help?

There are several situations that may subject you to this tax. Please contact your AAFCPAs Tax Advisor to discuss your situation. We have proactive tax planning strategies to mitigate the impact of this new 4% surtax on income greater than $1,000,000, such as income spreading, expense deferral, entity structure, and more.

If you have questions, please contact Ernest Carruthers, CPA, MST at 774.512.4122,; Dan Seaman, CPA, at 774.512.4025,; or your AAFCPAs Partner.

About the Authors

Daniel Seaman
Dan specializes in providing tax planning & compliance solutions for individuals, families and fiduciaries, helping AAF clients to safeguard and maximize their personal and family wealth.  He advises clients on year-end and multi-year tax planning strategies, including: minimizing the impact of the Alternative Minimum Tax (AMT); planning for mutual fund dividends and capital gains; estate & gift tax planning; maximizing charitable giving strategies; planning for estimated tax payments; minimizing the net investment tax; and minimizing overall taxes between generations of a family. Dan also provides tax planning & compliance solutions for privately-held businesses in a variety of commercial industries, including: high tech, software, manufacturing & distribution, professional services, physicians & private practice, retail and real estate.
Ernest Carruthers
Ernie provides proactive tax planning & compliance solutions for high-net-worth individuals, families, and trusts. He engages AAFCPAs’ clients in discussions to identify evolving personal circumstances and goals and determines how these impact short and long-term strategic tax planning efforts. He is fully committed to staying on top of the constant changes to federal and state tax codes to ensure clients do not have to pay a penny more than what is required.