Written by Prio Wealth’s Director of Financial Planning, Bill Dion, CFP®
Massachusetts Introduces Tax Relief
It’s been decades since the MA Legislature has both introduced and supported a broad tax relief package with impactful changes across the wealth spectrum. But, positioned as a bill to “Improve the Commonwealth’s Competitiveness, Affordability, and Equity” it gained widespread support and was signed into law on October 3, 2023. Changes relating to estate and capital gains taxes will be of particular interest to our clients and their wealth plans.
Key Highlights and Implications
Estate Tax: The threshold at which estate taxes are levied on a deceased person’s assets is effectively doubled to $2 million from $1 million. This is retroactive to Jan 1, 2023. As important as the increased amount, is the change to a ‘Uniform Estate tax Credit’ of $99,600.
Previously, the $1 million level was not an exemption. Estates valued at just $1 over the limit were subject to estate tax on the entire estate, creating an estate tax ‘cliff effect’ which was particularly burdensome to the relatively small estates subject to this tax. This new methodology ensures that only the value above the threshold is subject to tax and will preserve more of the value of your estate for your heirs.
The new legislation fails to index the amounts to inflation and doesn’t include any changes to the lack of portability of the exemption between spouses, however.
Short-Term Capital Gains: The tax rate on short-term capital gains rate is reduced to 8.5% from 12%. Short-term gains are gains realized upon selling an asset within one year of purchase. The Long-Term capital gains rate is unchanged at 5%.
At Prio, we generally try to avoid realizing short-term gains as a matter of practice, but they do occur from time to time. This will have a slightly marginal benefit when those types of transactions occur.
Single Sales Factor: This changes the way businesses are taxed to remove a dis-incentive for companies to hire and grow in-state which has created a challenge for attracting companies to move or retain headquarters in Massachusetts.
Student Loan Repayment Exemption: For those with student loans that receive payments for those loans as part of an employee benefit, those payments will not be treated as taxable compensation.
These are just a few of the more notable provisions that do indeed help improve the ‘competitiveness and affordability’ of Massachusetts relative to other states. If you would like more information on how these, or any other issues may apply to you specifically, please reach out to your Prio Wealth Advisor. Our goal is to guide our clients and help them navigate the financial issues that may impact them and their family. Please feel welcome to introduce us to like-minded friends and family members that may benefit from our services.
|This document has been prepared by Prio Wealth LP (“Prio Wealth”) for informational and educational purposes only and not as investment, legal or tax advice. This document reflects the opinions of Prio Wealth and it is based on information that we believe to be reliable at the time of publication. However, Prio Wealth does not guarantee the accuracy and completeness of any sourced data. Opinions expressed herein are not intended to provide personal advice and do not take into account the unique investment objectives and financial situation of the reader. This document is not an offer to sell or a solicitation of an offer to buy any security and does not constitute a representation as to the suitability or appropriateness of any security or financial product. Prio Wealth cautions the reader that investments in securities involve risks and that past results are not indicative of any future performance.|