- 1 Massachusetts State Tax Deductions
- 2 What is the Estate Tax in Massachusetts? | Massachusetts Probate Law
- 3 Sales Tax Calculator of Massachusetts for 2017
Massachusetts State Tax Deductions
Some commuting expenses are deductible in Massachusetts.
Massachusetts generally follows the federal tax code. Almost anything that you can deduct on your federal tax return is also a write-off when it comes to your Massachusetts state income taxes, as well. However, the state also adds additional deductions and credits of its own. These include write-offs for commuting, education, rent, work on your house and even the ability to write off some of your Social Security tax.
Massachusetts lets you write off up to $750 per year in approved commuter expenses as a deduction from your state taxes after you take your first $150 out of pocket. For example, if you spend $1,000, $750 of it will be tax deductible, but if you spend $850, only $700 of it will be a write-off. You can't write off every commuting expense, though: You can deduct only money that you spend on EZPass tolls or monthly or weekly passes for the Massachusetts Valley Transit Authority. Married couples can each claim the $750 deduction.
You can deduct up to $3,000 in rent that you pay on an apartment for which you have a rental agreement. The deduction is based on 50 percent of your actual rent, so to be able to deduct the full $3,000 in rent, you need to actually pay $6,000 in rent. Married couples that file separate returns have a limited deduction of just $1,500 per person.
Your first $2,000 per year of Federal Insurance Contributions Act contributions to Medicare and Social Security are tax deductible under Massachusetts law. If you file a joint return, both you and your spouse can each write off $2,000. Taxpayers who do not have FICA contributions withheld can write off money paid for Self-Employment Tax or contributions to a Railroad Retirement plan.
Residential Property Deductions
Similar to federal law, Massachusetts offers deductions for the cost of installing both solar or wind generation systems. However, the state also offers additional deductions for expenditures related to your home. Massachusetts law allows you to claim a tax credit to help defray a portion of the cost of replacing and no longer operational cesspool or septic system. The state also offers a credit to help you defray the cost of removing lead paint from your house.
Massachusetts education deductions are much more generous than those allowed under federal law. You can write off all of the student loan interest that you pay as a deduction on your Massachusetts state income taxes. The state also allows you to deduct all of the college tuition that you pay for yourself, your spouse or your dependents that is in excess of 25 percent of your Massachusetts adjusted gross income.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.
What is the Estate Tax in Massachusetts? | Massachusetts Probate Law
This question has no easy answer. At the outset, however, we will note that all estates under one million dollars are entitled to a full exemption from Massachusetts estate tax under current law. While there are no modifications on the horizon as of summer of 2012, the law may nevertheless change at any time.
Every resident of the Commonwealth should know some basic information about the Massachusetts estate tax, because predicting whether and how much tax will be due upon one’s death is a very challenging task for the layperson. Shifts in property values, changes in the state or federal tax codes, and unanticipated inheritances are a few examples of the variables that contribute to this challenge. With this article we aim to soften the challenge a bit (may take a few reads).
General Rule: The dollar amount ranges listed below correspond to the adjusted taxable estate. To calculate one’s adjusted taxable estate we use the following formula: (Total Federal Gross Estate – Allowable Federal Deductions – $60,000).
And so let’s look at an excerpt from the Massachusetts estate tax table. Below we have posted some of the marginal tax rates and tax liabilities associated with the values of progressively larger estates.
Take note that there are Massachusetts estate tax rates on estates valued below $1,000,000 down to $40,000. These rates will apply if the Massachusetts estate tax exemption is used up, or reduced for reasons we will get into later. But just for clarity, we are going to use hypothetical estate values to examine how much Massachusetts estate tax would be due when the full exemption is available:
Example 1: Mary passes away, leaving an entire estate valued at $2,100,500 after administrative and estate expenses. The total Massachusetts estate tax due on her estate would be $111,640, or $106,800 + $4,840 (8% of $60,500, the amount of the estate over $2,040,000).
Example 2: Sam passes away, leaving an entire estate valued at $3,940,000 after administrative and estate expenses. The total Massachusetts estate tax due on his estate would be $280,400 or $238,800 + $41,600 (10.4% of $400,000, the amount of the estate over 3,540,000).
Note that the above estate values are given after administrative and estate expenses. In the administration of an estate there are many services that the personal representative (formerly executor or administrator) will take advantage of. Expenses like the probate attorney, an accountant, a real estate agent employed to sell estate property, and other costs related to maintaining or managing the estate are some of the most common costs. As such, they are deducted from the value of the estate before calculating federal or Massachusetts state estate tax liability.
What is the Massachusetts Estate Tax if Gifts Have Been Made?
While there is no Massachusetts gift tax, one must be mindful that any gift of over $13,000 is considered a “lifetime gift” that reduces your Massachusetts estate tax exemption by the same amount. The purpose of course is to curb any attempts to avoid estate tax. But making a lifetime gift may still have a net positive effect on your overall estate tax due to the progressive marginal tax rate structure. The below examples illustrate how these tax savings are made:
Example 3: Mary at the age of 72 has a taxable estate of $2,400,000. Ten years later, at the age of 82, Mary dies leaving her entire estate of $2,100,500 after administrative expenses. The Massachusetts estate tax on Mary’s estate, as we already determined in Example 1 would be $111,640.
Example 4: Mary at the age of 72 has a taxable estate of $2,400,000. Over the next ten years, Mary makes taxable gifts of approximately $1,400,000, and leaves an entire estate of $1,000,000. Because the value of total taxable gifts made exceeds Mary’s $1,000,000 estate tax exemption, she now has $0 left in the Massachusetts estate tax exemption. The Massachusetts estate tax due on her estate according to the table above would be $36,560.
From the examples above, we see that Mary’s estate paid $75,080 less when she made lifetime gifts, than it would have paid if the gifts were not made. The savings are more dramatic with greater estate values.
How Do I Avoid the Massachusetts Estate Tax?
When someone passes away there really isn’t any way to avoid estate taxes, although certain estate plans can be drafted to allow for asset adjustments in order to maximize the exemptions made. Estate tax avoidance strategies are therefore mostly executed during the drafting of the estate plan itself. During our initial consultation, for example, we would assess potential estate tax liability and recommend various estate tax avoidance tools and devices tailored to a client’s situation.
Among the tools we use are lifetime gifting schedules – either outright or by the use of an LLC, the marital exemption, bypass and Q-TIP trusts, and Irrevocable trusts that contain anything from a home to a life insurance policy. Again, there are many options available in Massachusetts that should be tailored to each client’s particular circumstances. And often enough, avoiding Massachusetts estate taxes are not even the most important goal in an estate plan. For a preliminary report on your potential estate plan liability send an email to [email protected] or call us at 508-888-8100.
What about the Federal Estate Tax?
None of the information above takes into consideration the federal estate tax. For more information feel free to contact one of our experienced Cape Cod probate attorneys, or read our article on the federal estate tax.
Sales Tax Calculator of Massachusetts for 2017
How 2017 Sales taxes are calculated in Massachusetts
The state general sales tax rate of Massachusetts is 6.25%. Massachusetts cities and/or municipalities don't have a city sales tax.
Massachusetts state rate(s) for 2017
6.25% is the smallest possible tax rate (Agawam, Massachusetts)
6.3% is the highest possible tax rate (Springfield, Massachusetts)
The average combined rate of every zip code in Massachusetts is 6.25%
No changes Has been made in Massachusetts for county, city and/or special rates in 2017 compared to 2016.
The last rates update has been made on January 2017.