Massachusetts Raises Estate Tax Threshold To $2m

Great news. The Massachusetts Legislature has voted to pass a sweeping $1 billion tax package that will modify a wide range of Massachusetts tax laws, including those related to the estate tax.

When you die in Massachusetts, you have to pay an estate tax if all of your assets combined total OVER $1m. That number has been raised to $2m with the new billion dollar tax package.

How Did This Affect People?

An estate tax is placed on the combination of EVERYTHING that you own. So, a lot of people in MA had to pay the estate tax when it was $1m because the total of their assets exceeded $1m. This includes your house, stocks, life insurance policies, 401k’s, etc.

A lot of blue collar elderly people who had moderate were surprised to find out at the end of their lives that they were worth over $1m. The number was too low and punished middle class people for working their whole lives. It is also a “cliff” tax, which means that even if your estate is worth a penny over $1m, you have to pay taxes on the full $1m.

For this reason the legislature proposed raising the threshold to $3m to better fit the times and mirror inflation.

Instead, they decided to raise it to $2m, which isn’t a substantial change, but it surely is substantial for many working class people who are technically millionares but don’t even know it.

Just to give you an example, you could have a house worth $400k, a life insurance policy of $250k, a 401K with $500k and $100k in the bank and the state considers you a millionare.

With the new $2m threshold, more hard working middle class residents will be able to pay less taxes.

If your estate is worth under $2m you don’t have to pay any taxes in MA when you die.