Massachusetts Approves 4% Surtax on Millionaires in 2023

At A Glance

• Massachusetts voters approved a constitutional amendment imposing an additional 4% tax on taxable income greater than $1 million.
• This additional tax will apply for tax years beginning on or after January 1, 2023.
• We expect additional guidance from the agency on how to implement the surtax.

Summary

Since 1917, Massachusetts has had a flat-rate individual income tax. On November 8, 2022, voters approved amending the state's constitution to enact an additional 4% tax on individual taxable income greater than $1 million.

Beginning in 2023, Massachusetts will impose the additional 4% tax on taxable income greater than $1 million. The agency will adjust the $1 million income level annually to reflect increases in the cost of living by the same method used for federal income tax brackets.

Massachusetts will allocate revenue from the tax collected to public education and public transportation.

Updates

On January 10, 2023, the Massachusetts Department of Revenue announced that it would keep its current withholding tables included in the January 2020 Massachusetts Circular M. They do not anticipate updating the tables to reflect the new 4% surtax on taxable income greater than $1 million that came into effect January 1, 2023, until 2024. However, the agency has recommended estimating the appropriate withholding for 2023. We have updated our tables to account for this new 4% surcharge.

Thank you for choosing Paylocity as your Payroll Tax and HCM partner. This information is provided as a courtesy, may change, and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.