If you're a resident of Massachusetts and leave behind more than $1 million (for deaths occurring in 2023), your estate might have to pay Massachusetts estate tax. The Massachusetts tax is different from the federal estate tax, which is imposed only on estates worth more than $12.92 million (for deaths in 2023). So even if your estate isn't large enough to owe federal estate tax, it could very well still owe Massachusetts estate tax.
But it's not just state residents who might owe Massachusetts estate tax. If you're a nonresident but own real estate or other tangible assets (a boat or plane, for example) located in Massachusetts, your estate might also need to file a Massachusetts estate tax return.
If the gross estate of a Massachusetts resident has a value of more than $1 million, the personal representative or executor of the estate must file a state estate tax return. (Smaller estates won't need to file a return.) Your gross estate will include just about all of the property you own at your death:
Co-owned property. If you own assets with someone else, generally only your share will be included in your estate. In other words, if you and your spouse own your house, half of its value would be included in your estate.
Non-probate assets. Notably, your gross estate also includes non-probate assets. For example, the property you hold in a revocable living trust avoids probate, but it does not avoid estate taxes, and is counted in your gross estate.
Portability. The federal estate tax regime allows a surviving spouse to use the deceased spouse's unused portion of the exemption—a feature called "portability." However, Massachusetts' estate tax does not offer portability between spouses; each spouse has a separate exemption amount of $1 million.
Nonresidents. For estates of nonresidents (that is, those who lived in a different state when they died) who owned property situated in Massachusetts, the executor will still need to calculate the gross estate. The amount of tax due will then be based on a ratio: the value of property situated in Massachusetts to the gross estate (total property).
Even if a Massachusetts estate tax return must be filed, it doesn't necessarily mean that the estate will owe estate tax. Your estate might be able to take certain deductions that lower the value of your estate below $1 million, in which case no estate tax will be due. These deductions include:
If your estate owes estate tax, how much will it actually owe? In Massachusetts, the estate tax rate is based on a historical federal credit for state death taxes. To find out the exact state estate tax owed in 2021, see the Massachusetts Department of Revenue's Computation of Maximum Federal Credit for State Death Taxes. And yes, it's complicated. If you were to translate the amount owed into a tax rate on the portion of the estate that exceeds the Massachusetts exemption amount of $1 million, the top rate would be 16%—that is, you would not be taxed more than 16%. (Compare these rates to the current federal rate of 40%.)
If a return is required, it's due nine months after the date of death. As of 2016, if the executor pays at least 80% of the estate tax due before the deadline, there will be an automatic 6-month extension to file the return. But if the executor doesn't pay at least 80% of the tax by the deadline, there's a penalty, and interest accrues on the unpaid amount.
Certain forms are due alongside the MA estate tax return, including a historical version of the federal estate tax form (the version revised in 1999)—even if your estate does not owe federal estate tax. That's because the amount of Massachusetts estate tax owed is calculated based on federal credits. (If your estate exceeds $12.92 million and does owe federal estate tax, the executor will actually have to file two federal estate tax forms: the current one as well as the 1999 version.)
Your executor might have to hire professional help (an experienced lawyer or CPA) to prepare the Massachusetts estate tax return. If so, the estate's funds can be used to pay for professional fees. Estate tax forms and instructions are available from the Massachusetts Department of Revenue.
For more on estate planning issues specific to Massachusetts, see Nolo's Massachusetts Estate Planning section.