USA – MASSACHUSETTS Law and Practice Contributed by: Patricia M. Annino, Rimon, P.C.
1.4 Pre-Immigration and Exit Planning Immigration status is federal. Massachusetts focuses on residence, domicile and source of income. A for - eign national can therefore be subject to Massachu - setts income tax without becoming a US citizen or federal domiciliary for transfer tax purposes. Massachusetts treats an individual as a resident if the individual is domiciled in Massachusetts, or maintains a permanent place of abode there and spends more than 183 days in Massachusetts during the taxable year. A part-year resident is taxed as a resident during the portion of the year in which Massachusetts resi - dency applies. Even after departure from Massachu - setts, Massachusetts source income remains taxable. In 2026, the surtax is on income above USD1,107,750. Because domicile is highly fact-dependent and the taxpayer bears the burden of establishing a change in domicile, individuals leaving Massachusetts should carefully document the abandonment of their Mas - sachusetts domicile and the establishment of a new domicile. Before moving to Massachusetts a taxpayer should consider realising capital gains, receiving bonuses or deferred compensation, structuring ownerships and completed gifts while domiciled elsewhere, subject to federal and former state law. Some compensation can remain Massachusetts source income even when received after the taxpayer leaves Massachusetts. The current Massachusetts non-resident instructions expressly identify certain deferred compensation, separation pay, vacation pay, non-competition income and business sale gains as potentially Massachusetts source income. Before leaving a jurisdiction and mov - ing to Massachusetts, taxpayers should therefore establish a date on which domicile begins and main - tain contemporaneous evidence. Before changing domicile from Massachusetts, the taxpayer should understand that Massachusetts Department of Rev - enue domicile disputes can be extremely intensive. It is important to change the principal home, driver’s licence, tax filings, mailing address, voter’s registra - tion, principal banking/investing relationships, social and religious affiliations, the location of valuable tangi - ble personal property, estate planning documents and professional relationships. It is important to continue to review Massachusetts source income from employ -
2004; however, it is still permitted in Massachusetts. The amount of the elected QFOBI deduction cannot exceed the lesser of the adjusted value of the qualified family-owned business interests of the decedent oth - erwise includable in the gross estate or USD675,000. Inheritance tax, gift tax or generation-skipping transfer tax Massachusetts does not have an inheritance tax, gift tax or generation-skipping transfer tax. Land bank fees Unique to Massachusetts, the sale or transfer of real estate located in Nantucket, Martha’s Vineyard and certain towns on Cape Cod are subject to land bank fees, typically 2%. This is in addition to any convey - ance or excise tax. The buyer is responsible for the land bank tax. 1.2 Exemptions Massachusetts Estate Tax Filing Threshold. Massachusetts does not have a gift tax. The Massa - chusetts exemption is not tied to the federal exemp - tion. Massachusetts currently has a USD2 million filing threshold for individuals dying after 1 January 2023. A credit of up to USD99,600 is applied. The application of this credit eliminates the Massachusetts estate tax on up to USD2 million of the Massachusetts taxable estate. There is no portability election available. There - fore, planning must be done to utilise each spouse’s Massachusetts estate tax exemption (currently USD2 million). This is done through funding trusts during a person’s lifetime with the Massachusetts exemption amount, or postmortem by disclaimer to the trust, or outright. 1.3 Income Tax Planning Massachusetts income tax planning generally focuses on the timing and character of income, residency and domicile, Massachusetts source income, the addition - al 4% surtax applicable above the indexed threshold and basis planning. Estate planners should also con - sider the interaction between lifetime gifting and the basis adjustment available for assets included in a decedent’s estate under Internal Revenue Code (IRC) Section 1014.
764 CHAMBERS.COM
Powered by FlippingBook