Massachusetts Charitable Deduction Offers Planning Opportunity For “MA Millionaires Tax”

Massachusetts taxpayers can now claim a state income tax deduction for most charitable donations made on or after January 1, 2023. This benefit applies to all taxpayers, even if they don’t itemize deductions on their federal taxes.

This deduction is especially valuable due to the new “Millionaires Tax” in Massachusetts. As of January 1, 2023, a 4% state income tax surcharge applies to annual incomes exceeding $1 million. However, taxpayers can offset this surcharge by claiming deductions for their charitable contributions, including utilizing lump sum donor-advised fund contributions to help align multi-year philanthropic goals with optimal tax benefits.

In short, the new Massachusetts charitable contributions deduction reduces state income tax liability, even for those not subject to the MA Millionaires Tax.  However, this provision creates a particularly valuable planning opportunity for those subject to the extra 4% surtax. We are here to help discuss and analyze how you may be able to benefit from this new provision.