By Anthony Forcione and Kyle Gray, Financial Advisors at Moneta
As we try to turn the corner on a long winter and South Shore residents are meeting with their wealth advisors and accountants to deal with their taxes, this year's filing season brings Massachusetts residents several important changes, including a significant federal tax law change tied to state-specific rules that may impact your bottom line. Here are five things every South Shore household should know now.
1. Understand What’s New on Your 2025 Federal and State Returns
Even subtle tax law changes can impact high-income households. For 2025, inflation adjustments have modified income thresholds, retirement contribution limits, and estate and gift tax exemptions. Meanwhile, Massachusetts continues to update its own tax rules affecting affluent residents.
The new 4% surtax on taxable income above $1 million, known as the "millionaire’s tax" is a significant change. High earners may see state taxes jump during years of increased income.
For affluent taxpayers, a solution combines compliance with optimization. A thoughtful review of your return before filing can help identify:
Opportunities to accelerate or defer income
Changes to deduction eligibility
Exposure to the Massachusetts surtax threshold
Estate and gifting strategies aligned with updated limits
In other words, this is not a year to file on autopilot.
2. Find Your Roth Conversion “Sweet Spot.”
Roth conversions remain one of the most powerful long-term tax planning tools, especially for households with significant retirement assets. The challenge is determining how much to convert without unnecessarily pushing yourself into a higher tax bracket, federally or at the state level.
In Massachusetts, a large conversion can also trigger the 4% surtax if total income exceeds $1 million.
Affluent households often benefit from structuring and timing their conversion to:
Convert just enough to fill a lower tax bracket
Coordinate with lower-income years
Use charitable giving or deductions to offset conversion income
Build tax-free retirement income for the future
Families should also work with their financial advisors to double check Roth conversions against the Medicare IRMAA lines, as Medicare Parts B and D have surcharges that kick in at certain levels of Modified Adjusted Gross Income (MAGI).
Done thoughtfully and precisely timed, a Roth conversion strategy can reduce lifetime taxes, improve retirement flexibility, and simplify estate planning.
3. Harvest Losses and Manage Capital Gains with State Taxes in Mind
Tax-loss harvesting is widely known, but frequently underused at the portfolio level. Investors with taxable accounts should talk to their advisors about whether market volatility creates opportunities to offset gains and reduce current tax liability.
In Massachusetts, capital gains planning deserves special attention because state taxes can materially affect after-tax returns. This concern becomes particularly important in years when investors sell concentrated stock positions, rebalance portfolios, or exit investment properties.
For affluent investors with concentrated holdings or large portfolios, this strategy can produce meaningful tax savings year after year without altering overall investment objectives.
4. Revisit Where Your Assets Live
Many investors focus on asset allocation, stocks versus bonds, and growth versus income. But asset location can be just as important, especially when managing multiple account types across taxable and tax-advantaged environments.
Different investments are taxed differently, and placing them in the right type of account can significantly improve after-tax returns.
For example, residents may want to talk to their wealth advisors about:
Aligning tax efficiency with the right type of accounts/strategies
High-turnover strategies may benefit from tax-advantaged placement.
This is particularly relevant for households juggling multiple account types, where coordination can produce measurable gains without increasing risk.
5. Use the Full Toolkit, Including Strategies That Matter More in Massachusetts
Affluent households often have access to advanced tax strategies that extend well beyond standard deductions. The challenge is knowing which tools apply to your situation and carry unique advantages at the state level.
Some of the most impactful opportunities this year include:
Donor-Advised Funds (DAFs)
Health Savings Accounts (HSAs)
Qualified Business Income (QBI) Deduction
Backdoor Roth Contributions
Managing Embedded Gains
Qualified Opportunity Zones (QOZs) for tax deferral of capital gains
Cost Segregation Studies for Real Estate Investors
Estate Planning Strategies
For affluent households in Massachusetts, tax season is about planning across both federal and state systems. The most successful families treat their tax return as a roadmap, not a report card.
A thoughtful review of this year’s changes, combined with disciplined use of proven strategies, can help you:
Reduce lifetime tax liability
Improve investment efficiency
Strengthen retirement readiness
Preserve wealth for future generations
This allows you to move through tax season with more confidence and look towards an eventual, more relaxing summer season.
If you have concerns about your tax liability and are looking for efficient and effective ways to manage your wealth and legacy, an experienced financial advisor can answer your questions and help you plan for the life you want to live, both today and in the future.
Moneta is one of the nation's largest Registered Investment Advisors (RIAs) and is dedicated to empowering successful families, organizations, and foundations to navigate life's path and protect what they cherish, delivering personalized attention backed by the resources of a national firm. The Boston office opened in 2021 and serves clients in the Greater Boston area.