Selling in 2026: Capital Gains, “Millionaire” Surcharges, and Estate Taxes

As you move through the 2026 tax year in Middlesex, Suffolk, or Norfolk Counties, the “net proceeds” you received at closing are only half the story. The final chapter is written when you file your state and federal taxes.

While the fundamental federal rules for primary residences have remained stable, Massachusetts has introduced new reporting layers for high-value properties that every homeowner should understand.

1. The “Millionaire Tax” (Fair Share Amendment) Surcharge

In 2026, the Massachusetts “Fair Share Amendment” is in full swing. If your total taxable income for the year (including the profit from your home sale) exceeds the threshold—which is adjusted for inflation and sits at approximately $1,107,750 for 2026—you are subject to an additional 4% surtax on the portion above that amount.

• The Math: If your home sale generates a taxable gain of $1.5 million after all exclusions and you have no other income, the roughly $400,000 “excess” above the threshold is taxed at the standard rate plus an extra 4%.
• The New Withholding Rule: As of November 1, 2025, if your home sells for $1 million or more, the closing agent must file a Form NRW (Non-Resident Withholding), and each seller signs a Transferor’s Certification. If you are a full-year Massachusetts resident selling your primary home, you are likely exempt from the withholding, but you still must sign the certification at closing.

2. The Primary Residence Exclusion: Your Best Friend

Despite the high prices in Greater Boston, most sellers still benefit from the federal and state exclusion:

• $250,000 (Single) or $500,000 (Married Filing Jointly) of your profit is tax-free.
• The Rule: You must have owned and used the home as your primary residence for at least 2 of the last 5 years leading up to the sale.
• Cost Basis: Remember to add the cost of all capital improvements (that new roof in 2021 or the 2024 kitchen renovation) to your original purchase price. A higher “basis” means a lower “taxable gain.”

3. The Massachusetts Estate Tax

If you are selling a home as part of an estate (perhaps for a parent who lived in Newton or Wellesley), it helps to know how the Massachusetts estate tax works since the 2023 changes, which removed the old “cliff.” The tax now applies only to the value above the $2 million exemption.

• The $2 Million Threshold: The state estate tax exemption is currently $2 million. If the total value of the decedent’s estate (including the home) exceeds $2 million, an estate tax return (Form M-706) must be filed.
• Federal Gap: Keep in mind that the federal estate tax exemption is significantly higher (approximately $15 million per individual in 2026). This means many Massachusetts families will owe state estate tax even if they owe zero federal estate tax.

4. Step-Up in Basis for Inherited Homes

If you inherited a home in Suffolk or Norfolk County and are selling it in 2026, you likely benefit from a “step-up in basis.”

• Your “cost basis” is not what the original owner paid 40 years ago; it is the fair market value of the home on the date of their death.
• This significantly reduces—and sometimes eliminates—the capital gains tax for heirs, even in a high-appreciation market.

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The Strategy: Document Everything

The 2026 tax season will be complex for anyone with a high-value property transfer. I advise all my clients to:

1. Save the 1099-S: You will receive this form from the closing attorney. It reports the gross proceeds of the sale to the IRS.
2. Keep the Settlement Statement (ALTA): This lists all the deductible selling expenses (commissions, tax stamps, attorney fees) that reduce your taxable gain.
3. Consult a Professional: Especially in 2026, with the new withholding certifications for $1M+ sales, a quick meeting with a CPA can prevent a “correction notice” from the Department of Revenue (DOR) later.

Every situation is different, so confirm the details with your CPA or real estate attorney.

Are you wondering if your home sale will trigger the new 4% surtax? I can provide you with a Preliminary Gain Estimate that you can take to your accountant to help you plan for next April.