The "millionaires tax" in Massachusetts is an additional 4% surtax applied to personal taxable income exceeding $1,000,000.
Understanding the Massachusetts Millionaires Tax
Officially known as the 4% Surtax on Taxable Income Over $1,000,000, this tax was approved by Massachusetts voters in 2022 and became effective for the tax year 2023. It aims to generate additional revenue for the state, specifically for education and transportation initiatives.
Here are the key details of the tax:
| Feature | Detail |
|---|---|
| Official Name | 4% Surtax on Taxable Income Over $1,000,000 |
| Rate | An additional 4% |
| Taxable Threshold | Applied to taxable income over $1,000,000 (the first $1,000,000 is not subject to this surtax) |
| Approved By | Massachusetts voters (via a ballot question) |
| Approval Year | 2022 |
| Effective From | Tax Year 2023 |
| Applies To | Personal income taxpayers |
How the Surtax Works
This tax is not a new base income tax rate, but rather a surtax, meaning it's an additional percentage added on top of the existing Massachusetts personal income tax rate. It only applies to the portion of income that exceeds the $1,000,000 threshold.
For example:
- If a taxpayer has $950,000 in taxable income, they do not pay the 4% surtax, as their income is below the $1,000,000 threshold.
- If a taxpayer has $1,200,000 in taxable income:
- The first $1,000,000 is taxed at the standard Massachusetts income tax rate (currently 5%).
- The additional $200,000 (which is the income over $1,000,000) is subject to the standard rate plus the 4% surtax. Therefore, this $200,000 portion is taxed at 5% + 4% = 9%.
Background and Implementation
The implementation of the 4% surtax followed its approval by Massachusetts voters in November 2022. It took effect at the beginning of the 2023 tax year. Taxpayers whose taxable income exceeds the $1,000,000 threshold are required to calculate and pay this additional surtax when filing their state income tax returns.
For more detailed information, you can refer to the official resources provided by the Commonwealth of Massachusetts, such as the Department of Revenue's guidelines on the 4% Surtax on Taxable Income Over $1,000,000.
