Massachusetts Estate Tax Overview
Massachusetts is one of twelve states (plus D.C.) that impose a state estate tax. With a fixed $1,000,000 exemption — tied with Oregon for the lowest in the nation — Massachusetts catches many estates that owe nothing at the federal level. The exemption is not indexed for inflation and has remained at $1 million since Massachusetts decoupled from the federal estate tax.
I work with Massachusetts residents and non-residents who own MA property on estate tax planning, credit shelter trust design, lifetime gifting strategies, and the interplay between the estate tax and the new 4% millionaire surtax. Massachusetts's low exemption means proactive planning is essential for anyone with a home in Greater Boston, retirement accounts, and life insurance — a combination that easily exceeds $1 million.
2023 Cliff Fix: Effective January 1, 2023, Massachusetts eliminated the notorious cliff effect. Previously, exceeding the $1M threshold by even $1 could trigger tax on the entire estate. The new law provides a credit equal to the tax on $1M, so tax now only applies to amounts above $1M — similar to Oregon.
Massachusetts Estate Tax Calculator
Estimate Massachusetts estate tax using the $1M exemption and graduated rate schedule under M.G.L. Chapter 65C (post-2023 cliff fix).
Massachusetts Estate Tax Deep Dive
The $1 Million Exemption Problem
Massachusetts's $1 million exemption has not been adjusted since decoupling from the federal estate tax. In Greater Boston, where median single-family home prices exceed $700,000 in many towns, a homeowner with a paid-off house plus retirement accounts and life insurance routinely exceeds the $1M threshold. The exemption effectively functions as a middle-class estate tax.
Graduated Rate Structure
Massachusetts uses the pre-2002 federal credit for state death taxes as the basis for its rate schedule. The rates are graduated:
| Taxable Estate Range | Rate | Cumulative Tax |
|---|---|---|
| $0 – $40,000 | 0.8% | $320 |
| $40,001 – $90,000 | 1.6% | $1,120 |
| $90,001 – $140,000 | 2.4% | $2,320 |
| $140,001 – $240,000 | 3.2% | $5,520 |
| $240,001 – $440,000 | 4.0% | $13,520 |
| $440,001 – $640,000 | 4.8% | $23,120 |
| $640,001 – $840,000 | 5.6% | $34,320 |
| $840,001 – $1,040,000 | 6.4% | $47,120 |
| $1,040,001 – $1,540,000 | 7.2% | $83,120 |
| $1,540,001 – $2,040,000 | 8.0% | $123,120 |
| $2,040,001 – $2,540,000 | 8.8% | $167,120 |
| $2,540,001 – $3,040,000 | 9.6% | $215,120 |
| $3,040,001 – $3,540,000 | 10.4% | $267,120 |
| $3,540,001 – $4,040,000 | 11.2% | $323,120 |
| $4,040,001 – $5,040,000 | 12.0% | $443,120 |
| $5,040,001 – $6,040,000 | 12.8% | $571,120 |
| $6,040,001 – $7,040,000 | 13.6% | $707,120 |
| $7,040,001 – $8,040,000 | 14.4% | $851,120 |
| $8,040,001 – $9,040,000 | 15.2% | $1,003,120 |
| $9,040,001 – $10,040,000 | 16.0% | $1,163,120 |
| Over $10,040,000 | 16.0% | — |
Comparison: New England Estate Tax States
| State | Exemption | Top Rate | Gift Tax | Portability |
|---|---|---|---|---|
| Massachusetts | $1,000,000 | 16% | No | No |
| Connecticut | $13,610,000 | 12% | Yes (12%) | No |
| Rhode Island | $1,774,583 | 16% | No | No |
| Maine | $6,800,000 | 12% | No | No |
| Vermont | $5,000,000 | 16% | No | No |
| New Hampshire | N/A | N/A | No | N/A |
The 2023 Cliff Fix Explained
Before 2023, Massachusetts had a devastating cliff effect. The $1M exemption was a filing threshold — if your estate was $999,999, you owed $0. If it was $1,000,001, you owed tax on the entire $1,000,001 (not just the $1 over). This could generate $30,000+ in tax from being $1 over the line.
How the Fix Works
Effective January 1, 2023 (part of the FY2024 budget tax package), Massachusetts now provides a credit equal to the tax on $1,000,000. This means:
- The tax is still computed on the full taxable estate using the graduated rate schedule
- A credit of approximately $36,560 (the tax on $1M) is subtracted
- The net effect: only amounts above $1M are effectively taxed
- An estate of $1,000,001 now owes approximately $0.06 instead of ~$33,000
Practical impact: For a $2M estate, the pre-2023 tax was approximately $99,600. Post-2023, the tax is approximately $99,600 minus $36,560 credit = $63,040. The cliff fix saves approximately $36,560 for estates just over $1M, with the savings being a flat $36,560 for all estate sizes.
Still a Low Exemption
The cliff fix does not change the fundamental problem: Massachusetts still taxes estates above $1M. A $1.5M estate (common for a homeowner in Greater Boston) still owes approximately $26,560 in Massachusetts estate tax. Only a true increase in the exemption would address this, and no such legislation has advanced.
The 4% Millionaire Surtax (Question 1 / Fair Share Amendment)
Effective January 1, 2023, Massachusetts voters approved a constitutional amendment imposing a 4% surtax on annual income exceeding $1 million. This brings the top combined Massachusetts income tax rate to 9% (5% base + 4% surtax). The $1M threshold is indexed for inflation.
Impact on Estate Planning
While the surtax is an income tax (not an estate tax), it significantly affects estate planning:
- Incentive to leave Massachusetts: High-income residents face 9% state income tax plus the $1M estate tax exemption — a double hit. Moving to Florida or New Hampshire eliminates both.
- Capital gains planning: Selling a business or investment property can trigger the surtax. Gifting appreciating assets to family members in lower-tax states (before selling) can avoid both the surtax and reduce the MA estate.
- Trust income distribution: Accumulating income in a Massachusetts trust may trigger the surtax at the trust level. Distributing income to non-MA beneficiaries can avoid the surtax.
- Charitable planning: The surtax makes charitable deductions more valuable — a $100,000 charitable contribution saves $9,000 in MA taxes for someone in the surtax bracket.
Domicile audit risk: The surtax gives Massachusetts strong incentive to audit domicile changes. If you claim to have moved to Florida but still spend significant time in MA, own a home there, and maintain MA ties, the Department of Revenue may challenge your domicile and assess both income tax (including surtax) and estate tax.
Lifetime Gifting: The Primary Strategy
With the $1M exemption, systematic lifetime gifting is the most effective planning strategy. Massachusetts has no gift tax and no clawback.
- Annual exclusion: $18,000 per donee (2024). A couple with gift splitting can give $36,000/year per donee.
- Direct education/medical: Unlimited gifts paid directly to educational institutions or medical providers under IRC 2503(e).
- Gifts of appreciating assets: Transfer assets expected to grow to lock in today's value and remove future appreciation from the estate.
Credit Shelter Trust (Essential for Couples)
Massachusetts has no portability. A credit shelter trust funded at the first death with $1M preserves both spouses' exemptions. Without it, a couple with $2M wastes an entire $1M exemption.
ILIT for Life Insurance
A $500,000 term life insurance policy can push an otherwise non-taxable estate over the $1M threshold. An irrevocable life insurance trust (ILIT) owns the policy, keeping proceeds out of the taxable estate.
Domicile Planning
For high-net-worth MA residents, changing domicile eliminates both the estate tax and the millionaire surtax. Popular destinations: Florida (no estate tax, no income tax), New Hampshire (no estate tax, no income tax on wages). However:
- MA real property remains subject to MA estate tax regardless of domicile
- MA aggressively audits domicile changes — maintain clean records
- Consider selling MA real property before or after the domicile change to avoid non-resident taxation
The Massachusetts QTIP Election
Massachusetts allows an independent QTIP election separate from the federal election. Strategy:
- Federal QTIP: Elect on all marital trust property (defers federal tax via marital deduction)
- Massachusetts QTIP: Do NOT elect on the first $1M (uses first spouse's MA exemption now)
- Result: $1M passes free of MA tax using the first spouse's exemption. The balance is deferred to the surviving spouse's estate.
Example: Husband dies with $3M estate in a QTIP trust. Federal QTIP: yes on all $3M. MA QTIP: yes on $2M, no on $1M. Result: $1M uses husband's MA exemption = $0 MA tax now. At wife's death, $2M + her own assets are taxed against her $1M exemption. Net savings: approximately $36,560 (the full unified credit).
Credit Shelter Trust Design for Massachusetts
- Fund with $1M at first death (matching the MA exemption)
- Give surviving spouse income interest plus principal access under an ascertainable standard
- Include a testamentary limited power of appointment for flexibility
- QTIP trust for the balance with independent MA QTIP election
- Disclaimer provision for post-mortem optimization
Disclaimer Planning
Massachusetts recognizes qualified disclaimers under M.G.L. Chapter 191A. A surviving spouse can disclaim assets to redirect them into a credit shelter trust. The disclaimer must be made within 9 months of death and before accepting any benefit from the property.
Non-Resident Massachusetts Estate Tax
Non-residents owning MA real property or tangible personal property located in MA may owe Massachusetts estate tax. The calculation:
- Compute the MA estate tax as if the decedent were an MA resident (on the entire estate)
- Prorate based on the ratio of MA-situs property to total gross estate
The $1M exemption is effectively prorated. If MA property is 30% of a $5M estate, the effective exemption for MA purposes is approximately $300,000.
Massachusetts-Situs Property
- Real property: All real estate located in Massachusetts
- Tangible personal property: Physical items located in MA (vehicles, art, collectibles)
- NOT included: Intangible property (stocks, bonds, bank accounts) — follows domicile state
Planning for Cape Cod / Berkshires Vacation Homeowners
- Hold MA vacation property in an LLC (may convert real property to intangible property for estate tax purposes)
- Gift the property during life (no MA gift tax)
- Use a QPRT to transfer at reduced gift tax value
- Consider selling before death if the estate tax cost exceeds the property's value to heirs
Frequently Asked Questions — Massachusetts Estate Tax
Yes. Massachusetts imposes a state estate tax under M.G.L. Chapter 65C. The exemption is $1,000,000 — tied with Oregon for the lowest in the country. Rates range from 0.8% to 16%. No inheritance tax, no gift tax.
$1,000,000. Not indexed for inflation. After the 2023 cliff fix, a credit equal to the tax on $1M ensures that only amounts above $1M are effectively taxed.
No. The cliff was eliminated effective January 1, 2023. Previously, exceeding the $1M threshold triggered tax on the entire estate. Now a credit equal to the tax on $1M is applied, so tax only applies to amounts above $1M.
No. Massachusetts does not impose a state gift tax, and there is no gift clawback. Every dollar gifted during life permanently reduces the MA taxable estate.
A 4% surtax on annual income exceeding $1 million, effective 2023. This is an income tax, not an estate tax, but it affects planning by increasing the tax burden on high-income residents and creating incentives for domicile changes.
No. Massachusetts does not allow portability. A credit shelter trust is essential for married couples to preserve both $1M exemptions.
Form M-706 is due 9 months from the date of death. A 6-month extension is available via Form M-4768. Tax must be paid by the original deadline.
Yes for non-MA assets. Moving eliminates estate tax on everything except MA real property and MA tangible personal property. Massachusetts aggressively audits domicile changes, especially with the surtax incentive.
MA has the lowest exemption in New England ($1M). Connecticut matches the federal exemption ($13.61M). Rhode Island has $1.77M (CPI-indexed). Maine has $6.8M. Vermont has $5M. New Hampshire has no estate tax.
Yes, if the decedent owned the policy or had incidents of ownership. An ILIT removes proceeds from the taxable estate. Given the $1M exemption, even modest policies can trigger tax.
Yes. MA allows an independent QTIP election separate from federal. You can make a federal QTIP election while not making an MA QTIP on the first $1M to use the first spouse's exemption.
Yes. No gift tax, no clawback, no lookback. Annual exclusion gifts ($18,000/donee in 2024), direct tuition/medical payments, and gifts of appreciating assets all permanently reduce the MA estate.
Post-2023: approximately $63,040 (total tax on $2M of ~$99,600 minus the $36,560 unified credit). Pre-2023 (with cliff): approximately $99,600. The cliff fix saves $36,560.
Yes. Non-residents who own MA real property or tangible personal property owe MA estate tax, prorated based on the ratio of MA property to total estate.
Yes. Massachusetts imposes a deed excise tax of $2.28 per $500 of consideration (approximately 0.456%). Some municipalities may impose additional local transfer taxes. Transfers at death are generally exempt.
After sunset, estates above ~$7M face both federal and MA tax. Pre-sunset gifting locks in the high federal exemption while reducing the MA estate.
A trust funded at the first death with $1M (the MA exemption). The surviving spouse gets income and principal access, but the assets bypass estate tax at the second death. Essential because MA has no portability.
No. Massachusetts is a common-law (separate property) state. It may recognize community property characterization for property acquired while domiciled in a community property state.
Massachusetts conforms to federal deductions: unlimited marital deduction, charitable deduction, debts and administration expenses, funeral expenses, and state/local taxes.
MA allows a full charitable deduction for property passing to qualifying charities, mirroring the federal deduction. CRTs and CLTs can reduce the taxable estate while providing income or supporting philanthropy.
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I help Massachusetts residents and non-residents with estate tax planning, credit shelter trusts, QTIP elections, lifetime gifting strategies, and the interplay with the millionaire surtax.