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Does Massachusetts Have an Estate Tax?

Yes.  Massachusetts has an estate tax.  If you are feeling motivated here is the Massachusetts Department of Revenue Guide to the estate tax: https://www.mass.gov/guides/a-guide-to-estate-taxes

The Massachusetts Department of Revenue states “for dates of death on or after January 1, 2003, the executor of a decedent who was a domiciliary of Massachusetts must file a Massachusetts Estate Tax Return (Form M-706 ) if the gross value of an estate, plus adjusted taxable gifts, exceeds the applicable exclusion amount in the Internal Revenue Code in effect on December 31, 2000. The applicable exclusion amounts for Massachusetts estate tax purposes are as follows”:

2003 $700,000
2004 $850,000
2005 $950,000
2006 $1,000,000

What does that mean?

Well, in short that means that if you die during 2006 or any time thereafter you do not need to file a Massachusetts estate tax return if you have less than $1,000,000 in assets (adjusted for taxable gifts).

On the flip side of that, of course, means you must file a Massachusetts estate tax return if you have more than $1,000,000 in assets (adjusted for taxable gifts).

So if you must file a Massachusetts estate tax return how much will you owe?  This is where it gets fun.

The Massachusetts estate tax is computed as follows:

“Effective for dates of death on or after January 1, 2003, the Massachusetts estate tax for the estates of residents and nonresidents is computed with reference to the allowable federal estate tax credit for state death taxes allowed in the Internal Revenue Code in effect on December 31, 2000. If an estate consists solely of property subject to Massachusetts estate taxation, it pays to Massachusetts an amount equal to the federal credit for state death taxes computed using the Internal Revenue Code in effect on December 31, 2000. A link to the federal rate table used to compute the credit for state death taxes is set out below.

In the case of a resident of Massachusetts who owned or transferred real estate or tangible personal property located outside of Massachusetts, Massachusetts grants a credit for estate or inheritance taxes properly paid to other states. In these cases, the Massachusetts estate tax is the amount of the federal credit for state death taxes minus the lesser of:

(1) The total of the amount of all estate, inheritance, legacy and succession taxes actually paid to other states for property owned by the decedent or subject to those taxes in connection with the estate; or

(2) The amount equal to the proportion of the allowable credit as the value of the properties taxable by other states bears to the value of the entire federal gross estate wherever situated.”

Basically, the Massachusetts estate tax is based on the maximum federal tax credit as of December 31, 2000.  So, once your estate is valued at more than $1,000,000 you need to refer to the federal tax rate table that was used by the federal government on December 31, 2000 to see how much you would owe.

You can view the federal tax rate table here: https://www.mass.gov/guides/a-guide-to-estate-taxes#-computation-of-maximum-federal-credit-for-state-death-taxes-

Confused yet?  Wait there’s more!  Once your estate is valued at any amount over $1,000,000 the tax amount starts at $27,600 and then a progressive tax structure kicks in going up to 16% on the amount over $1,000,000.

Needless to say, how the Massachusetts estate tax is calculated is confusing.  Speak to a qualified estate planning attorney to get a better understanding of the Massachusetts estate tax and techniques that can be used to deal with it.