What Is the Millionaire's Tax in Massachusetts?
The Millionaire’s Tax in Massachusetts is an additional 4% surtax applied to annual income that exceeds $1 million. This tax, also known as the Fair Share Amendment, was approved by voters in 2022 and took effect in 2023.
How the Millionaire’s Tax Works
Massachusetts has a flat income tax rate of 5% on earned income. However, individuals with taxable income exceeding $1 million now pay an extra 4% on the portion above that threshold.
For example:
If a taxpayer earns $900,000, they pay only the standard 5% state income tax.
If a taxpayer earns $1,200,000, the first $1 million is taxed at 5%, while the remaining $200,000 is taxed at 9% (5% + 4%).
This surtax applies to all sources of taxable income, including wages, business profits, and capital gains. As a result, individuals who sell valuable assets, such as real estate or stocks, may also be subject to this tax if their total income exceeds the threshold.
Who Does the Millionaire’s Tax Affect?
This tax primarily impacts high-income individuals, such as:
Business owners with high earnings
Investors with large capital gains
High-earning professionals
Retirees selling assets with significant gains
Revenue Allocation
The additional revenue from the Millionaire’s Tax is designated for public education and transportation improvements, including:
K-12 and higher education funding
Road and bridge maintenance
Public transit enhancements
Infrastructure upgrades to improve accessibility
Impact on High-Income Earners
High-income individuals may explore tax planning strategies to manage their liabilities, such as:
Income deferral strategies
Charitable contributions
Trust and estate planning
Relocation considerations to states with lower tax burdens
Conclusion
The Millionaire’s Tax in Massachusetts applies a 4% surtax on income over $1 million, raising the total tax rate on that portion to 9%. Understanding this tax helps high earners plan their finances effectively and explore strategies to manage their tax burden.
