New Massachusetts Estate Tax Exemption

Massachusetts doubled its estate tax exemption to $2 million in 2023. Here’s how the changes may impact real estate owners, estate planners, and married couples.

Massachusetts Estate Tax Exemption Doubled to $2 Million

Massachusetts has significantly revised its estate tax rules, these changes have important implications for Massachusetts estate planning strategies going forward. The changes apply to estates for Massachusetts residents who died on or after January 1, 2023. The major change is the increase of the Massachusetts estate tax exemption from $1 million to $2 million, but there are other notable revisions as well. The increased exemption should simplify estate planning for many Massachusetts residents whose estates now fall below the filing threshold.

How Massachusetts Calculates Estate Tax

Under prior law, estates that exceeded the $1 million threshold had to pay tax on the entire value of the estate — including both the first $1 million and any amounts above that. Under the new law, for estates that exceed the $2 million exemption, the first $ 2 million remains exempt, and only the portion of the estate the exceeds $2 million is subject to Massachusetts estate tax.

Real Estate Outside Massachusetts Now Exempt

Real estate often makes up a large portion of Massachusetts estates. Under the prior law, the value of real estate outside Massachusetts was used in calculating the Massachusetts estate tax. Under the new law, M.G.L. c. 65C, § 2A(a), real estate and property outside Massachusetts is now excluded when determining the value of an estate for estate tax purposes. For more detail, see Technical Information Release 24-13 issued by Massachusetts Commissioner of Revenue regarding estate taxation of real estate outside Massachusetts.

Estate Tax Planning for Married Couples in Massachusetts

Massachusetts still does not allow for portability of estate tax exemption between spouses. In other words, if the first spouse dies without using his or her full $2 million exemption, the unused portion of the exemption is lost, and may not be passed on or carried over to the surviving spouse’s estate. The most reliable way to maximize the use of Massachusetts estate tax exemption between spouses is to take active planning steps before the death of the first spouse, such as creating a marital or credit shelter trust.