On Wednesday October 4, 2023, Massachusetts Governor Maura Healey signed a $1 billion tax package into law. This significant legislation will increase tax credits for caregivers, renters, and seniors, and provide benefits for the business community. Through this legislation, Healey hopes to make the cost of living more affordable to families.
“We are thrilled to deliver on our promise to pass tax cuts that will result in real savings for the people of Massachusetts, including the country’s largest child and family tax credit that will go back into the pockets of parents and caregivers,” Healey said. “This tax package delivers savings for those who need it most while making long overdue changes that will better allow Massachusetts to compete with other states.”
Below is an overview of key changes:
Child and Dependent Tax Credit
- The new legislation increases the tax credit for a dependent child, disabled adult, or senior from $180 to $310 for tax year 2023, and to $440 in tax year 2024 and beyond. The child/dependent cap has also been eliminated.
- The new legislation raises the estate tax threshold from $1 million to $2 million while eliminating the so-called “cliff-effect” – now, if your estate goes over $2 million, only the difference above $2 million is taxed, not the entire estate as it was previously. This change is retroactive to January 1, 2023.
Senior Circuit Breaker Tax Credit
- The new legislation doubles the maximum senior circuit breaker credit from $1,200 to $2,400.
- The new legislation increases the cap on the rental deduction from $3,000 to $4,000.
Housing Development Incentive Program (HDIP)
- The new legislation increases the statewide cap from $10M to $57M one-time, then to $30M annually.
Property Tax Exemption for Affordable Housing
- The new legislation allows municipalities to adopt a local property tax exemption for affordable real estate that is rented by a person whose income meets certain requirements.
Low-Income Housing Tax Credit
- The new legislation raises the annual authorization from $40M to $60M.
Earned Income Tax Credit
- The new legislation increases the earned income tax credit from 30% to 40% of the federal credit.
Short-Term Capital Gains
- The new legislation reduces the tax rate on short-term capital gains from 12% to 8.5%.
Married Filing Jointly
- The new legislation requires married individuals who file a joint federal tax return to also file a joint Massachusetts tax return, effective for tax years on or after January 1, 2024. This change comes as a result of the 2023 Massachusetts Millionaire's Tax, which led married taxpayers to try to mitigate the tax by filing separate state returns.
Single Sales Factor
- The new legislation shifts from a three-factor apportionment system based on the business' share of sales, payroll and property, to an apportionment based only on sales.
- Lead paint abatement credit has been doubled to $3,000 for full abatement and $1,000 for partial abatement.
- The Title V Cesspool or Septic System Tax Credit triples the maximum credit available from $6,000 to $18,000 and increases the maximum amount claimable to $4,000 per year.
Additional tax changes include increasing the dairy tax credit; commuter transit benefits; apprenticeship tax credit reforms; and senior property tax volunteer program changes.
If you have questions about the new tax legislation, leave a comment below, or feel free to contact me directly.