What Is the Estate Tax Rate in Massachusetts?

The Massachusetts estate tax is a state-level levy on the total value of a deceased individual’s assets before they are distributed to their beneficiaries. This tax is distinct from the federal estate tax, which has a significantly higher exemption threshold. Understanding how this tax is calculated and applied is important for residents and those with property in the state.

Determining the Massachusetts Taxable Estate

The first step in understanding potential estate tax liability involves determining the “gross estate,” which encompasses nearly all property interests owned or controlled by an individual at the time of their death. This includes real estate, both within and outside Massachusetts, bank accounts, investment accounts, and retirement accounts. Life insurance policies owned by the decedent and personal property like vehicles and jewelry are also part of the gross estate.

Once the gross estate is established, certain allowable deductions can reduce its value, leading to the “Massachusetts taxable estate.” Common deductions include funeral expenses and administrative costs associated with settling the estate, such as attorney and executor fees. Debts owed by the decedent at the time of death, like mortgages and credit card balances, also serve as deductions. Furthermore, an unlimited marital deduction allows for property transferred to a surviving spouse to be deducted from the gross estate, meaning such transfers are not subject to the Massachusetts estate tax. Gifts to qualified charitable organizations can also be deducted.

Applying the Massachusetts Estate Tax Rates

Massachusetts imposes an estate tax on estates exceeding a specific exemption amount. For deaths occurring on or after January 1, 2023, the exemption threshold is $2 million. A significant change in Massachusetts estate tax law eliminated the “cliff effect,” which previously subjected the entire estate to tax if it exceeded the threshold by even a small amount. Now, only the portion of the estate exceeding the $2 million threshold is subject to the tax, effectively providing a $99,600 credit against the estate tax.

The Massachusetts estate tax employs a progressive rate schedule, with rates starting at 7.2% and capping at 16% for larger estates. The top rate of 16% applies to taxable estates of $11 million and over. This graduated scale means that as the taxable estate’s value increases, higher portions of it are taxed at incrementally higher marginal rates.

To illustrate, consider an estate with a Massachusetts taxable value of $2.05 million. Under the current law, the estate would owe tax only on the $50,000 exceeding the $2 million threshold. The Massachusetts Department of Revenue provides a detailed guide for calculating the exact tax owed, which often involves a structured table outlining base tax amounts for each bracket and marginal rates on the excess within that bracket.

Estate Tax Return Filing and Payment

The personal representative or executor of an estate is generally responsible for filing the Massachusetts estate tax return, Form M-706. This filing is required if the gross value of the decedent’s estate, when combined with adjusted taxable gifts, exceeds the $2 million threshold. A copy of the federal estate tax return (U.S. Form 706) must also be included with the Massachusetts filing, even if a federal return is not otherwise required.

The deadline for filing Form M-706 and paying any tax due is nine months after the date of the decedent’s death. If additional time is needed, an extension to file can be requested, typically for six months, by submitting Form M-4768 before the original due date. An extension of time to pay can also be requested, but this is not automatic and requires review by the Massachusetts Department of Revenue. It is important to note that an automatic extension of time to file is granted if at least 80% of the estimated tax due is paid by the original nine-month deadline.

Estate tax returns can be submitted electronically through the MassTaxConnect system, which also facilitates online payments. Acceptable payment methods include electronic funds transfer from a checking or savings account. Payments can also be made by credit or debit card, though a convenience fee applies, or by mail with a check payable to the Commonwealth of Massachusetts. The estate representative who signs the return may be held personally responsible for payment if the tax remains unpaid.