Massachusetts tax could hit one-off millionaires but advisors keep levy in perspective
A Massachusetts millionaires tax can encompass people who rise above the $1 million earnings threshold only briefly as the result of the sale of a home or business, but financial advisors say most of their clients won’t be affected.
Last November, Massachusetts voters approved a change to the state’s constitution to allow a 4% surtax on income that exceeds $1 million. Combined with the state’s 5% flat tax on income, it amounts to a 9% tax on the portion of income that is om seven figures. The tax went into effect on Jan. 1.
Gov. Maura Healey included $1 billion in expected revenue from the tax to fund some education and transportation spending in the budget she signed last week.
Some taxpayers who may not feel particularly rich can exceed the $1 million threshold through property sales and other events that boost income.
“Most voters didn’t realize the millionaires tax included one-time sudden windfalls like the sale of a home,” said Kristin McKenna, president of Darrow Wealth Management in Needham, Massachusetts. “The surtax will impact many of our clients when they sell their home. But it also affects clients who have a windfall from equity compensation.”
Beyond the one-off events that can make someone a temporary millionaire, the effect of the Massachusetts tax is not likely to be widespread. The tax applies to about 0.6% of Massachusetts households in a given year, or about 21,000 taxpayers, according to a Tufts University report.
“Most of the time, it doesn’t affect most of the people I [work] with,” said Chris Chen, wealth strategist at Insight Financial Strategists in Newton. “Eventually, it’s going to affect 10% to 20%.”
Steve Stanganelli, principal at Clear View Wealth Advisors in Amesbury, said he has one
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