Does The Massachusetts Estate Tax Count Out-Of-State Real Estate?
Massachusetts has its own estate tax. It covers many estates in the Commonwealth that do not have any federal estate tax liability. In 2023, lawmakers increased the Massachusetts estate tax exemption from $1 million to $2 million. As part of that reform, the law changed. Out of state real estate—which was previously exempt from estate tax calculations—became a countable asset. However, in the fall of 2024, another reform was passed. Out-of-state real property is not counted for estate tax purposes in Massachusetts. Here, our Boston estate planning attorney explains the key things to understand about estate tax regulations in Massachusetts for those who own real property in another state.
An Overview of the Massachusetts Estate Tax
Massachusetts is one of a minority of U.S. states that has a state-level estate tax. The Massachusetts estate tax is a transfer tax levied on the value of a decedent’s estate before distribution to beneficiaries. Starting on January 1st, 2023, the tax only applies to estates with a total value of $2 million. The estate tax exemption was previously $1 million—but it was doubled.
When the Estate Tax Exemption Double, Language Around Out-of-State Property Changed
The 2023 tax reform not only increased the exemption amount but also introduced changes to how out-of-state real estate was treated in estate tax calculations. Prior to 2023, the value of out-of-state real estate—such as a Boston resident’s second home in Florida—was not subject to the Massachusetts estate tax. However, under the new law, real estate and tangible personal property located outside Massachusetts were included in the gross estate for tax purposes. In effect, that meant that if a Massachusetts resident owned property in another state, the value of that property would be considered when determining the estate’s value relative to the $2 million exemption.
Lawmakers in Massachusetts Made it Clear: Real Property in Another State is Not Counted
In September of 2024, Massachusetts laws passed a supplemental budget bill that included a key provision that exempt out-of-state real estate from the Commonwealth’s estate tax calculations. The legislation clarified that real estate and other tangible personal property located outside Massachusetts are explicitly excluded from the gross estate for tax purposes. Notably, the amendment was retroactively effective for people dying on or after January 1st, 2023 but before the Fall of 2024. As a consequence, some people that included out-of-state property in their estate tax filings had the right to seek refunds for estate taxes paid.
The Bottom Line: Despite some confusion due to recent legislative changes, out-of-state real estate is not counted for the purposes of the Massachusetts estate tax.
Contact Our Boston Estate Tax Planning Attorney Today
At Fisher Law LLC, our Boston estate planning lawyer has the skills and experience to help clients navigate the full range of estate tax matters. Have property in another state? We can help you prepare a comprehensive plan. Contact us today for a fully confidential consultation. Our firm provides estate planning services throughout the greater Boston Area.
