A sweeping tax bill, H. 4104, was signed by Governor Healey, bringing tax cuts to Massachusetts taxpayers for the first time in 20 years. The legislation included tax cuts to corporations, individuals, and estates with the following provisions, most effective for tax years after January 1, 2023:
- Changes the three-factor apportionment method of including sales, payroll, and property in the calculation of multistate corporate income to the single-sales method, which typically favors in-state taxpayers (effective January 1, 2025).
- Reduces the capital gains tax rate from 12 to 8.5% on the sale of capital assets held for less than 12 months.
- Increases the child and dependent tax credit from $180 per dependent to $310 in 2023 and $440 in 2024 and beyond.
- Increases the refundable “senior circuit-breaker credit” for real estate taxes or rent paid by seniors from $1,200 to $2,400.
- Increases the Earned Income Tax Credit from 30 to 40% of the federal credit.
- Increases the cap on the rental deduction from $3,000 to $4,000.
- Increases the statewide cap on the Housing Development Incentive Program from $10 million to $57 million one time and then to $30 million annually.
- Triples the maximum Septic System Tax Credit available from $6,000 to $18,000 and increases the amount claimable to $4,000 per year for the cost of septic tank replacement or repair.
- Reduces the estate tax for all taxpayers and eliminates the tax for all estates under $2 million by allowing a uniform credit of $99,600.
In addition, the bill requires payments if Chapter 62F is triggered to be paid out equally among taxpayers, rather than as a percentage of income tax paid for that year. Chapter 62F was passed in 1986 to require the state to return excess revenue to the taxpayers. This provision was triggered most recently in 2022, when taxpayers received a refund of approximately 14% of their individual income tax liability.
This bill also requires married taxpayers who file a joint return with the federal government to file a joint state return, subject to exemptions or adjustments issued by the Department of Revenue. Previously, married taxpayers filing jointly for federal income tax purposes were not required to file under the same method for the state. This new rule is effective for the 2024 tax year and presumably will prevent married couples from avoiding the new millionaire’s surtax imposed on income in excess of $1 million.
If you have questions about any of these new requirements, please contact one of the Ryan experts listed below.
TECHNICAL INFORMATION CONTACTS:
Michael Martens
Principal
Ryan
972.934.0022
michael.martens@ryan.com
Argi O’Leary
Principal
Ryan
212.871.3901
argi.oleary@ryan.com
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.