How Might the “Millionaire’s Tax” Impact You?

On November 8 voters in Massachusetts narrowly approved a constitutional amendment authorizing an additional personal income tax of 4 percent on all annual income above a $1 million threshold. While similar amendments have been proposed and voted on in prior years, this is the first time the measure has passed. Proponents estimate the new tax, which is effective for tax years beginning January 1, 2023, will raise between $1 billion and $2 billion in new tax revenue annually. All revenue raised by this tax is, by statute, earmarked for spending on public education and transportation.

No matter which side of the ballot question you were on, the results are final, and the new tax will be imposed on income exceeding $1 million starting next year.

What could this mean for you? All income reported, from any source, above the $1 million threshold will be taxed at 9 percent (the standard Massachusetts 5 percent income tax rate, plus the 4 percent additional tax). This includes regular wages, income from the sale of a home or business, long term capital gains, short term capital gains, and dividends. It is important to note that Massachusetts taxes short term capital gains at 12 percent, making the effective new tax rates on this income 16 percent.

Final regulations surrounding the 4 percent additional tax are still being finalized. But it is important to evaluate the impact of this law change on your tax situation to identify opportunities to reduce or otherwise mitigate your exposure to the new tax. For additional information and assistance, please contact Gray, Gray & Gray at (781) 407-0300. 

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