New Massachusetts $1 billion tax package signed into law

On October 3, 2023, Massachusetts Governor Maura Healey signed a $1 billion tax package passed by the Massachusetts Legislature into law.  The bill is wide-reaching and affects a number of constituencies in Massachusetts.  Here's an overview of some of the impacts of the bill, many of which take effect for the 2023 tax year.

Child and Dependent Tax Credit
Increases the tax credit for a dependent child, disabled adult, or senior from $180 to $310 in taxable year 2023, and then to $440 in taxable year 2024 and beyond, per dependent, while eliminating the child/dependent cap.

Estate Tax
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.  This also eliminates the "cliff effect" (wherein an entire estate gets taxed when it hits the threshold, not just the amount over it).

Earned Income Tax Credit
Increases the earned income tax credit from 30% to 40% of the federal credit.

Senior Circuit Breaker Tax Credit
Doubles the maximum senior circuit breaker credit from $1,200 to $2,400.

Rental Deduction
Increases the cap on the rental deduction from $3,000 to $4,000.

Short-Term Capital Gains
Reduces the tax rate on short-term capital gains from 12% to 8.5%.

Housing Development Incentive Program (HDIP)
Increases the statewide cap from $10M to $57M one-time, and then to $30M annually.

Low-Income Housing Tax Credit
Raises the annual authorization from $40M to $60M.

Local Option Property Tax Exemption for Affordable Housing
Permits municipalities to adopt a local property tax exemption for affordable real estate that is rented by a person whose income is less than a certain income level set by the community.

Title V Cesspool or Septic System Tax Credit
Triples the maximum credit available from $6,000 to $18,000 and increases the amount claimable to $4,000 per year.

Lead Paint Abatement
Doubles the credit to $3,000 for full abatement and $1,000 for partial abatement, to support families with older homes.

Dairy Tax Credit
Increases the statewide cap from $6M to $8M, to provide more assistance for local farmers during downturns in milk prices.

Student Loan Repayment Exemption
Ensures that employer student loan payments are not treated as taxable compensation.

Commuter Transit Benefits
Makes public transit fares, as well as ferry and regional transit passes and bike commuter expenses, eligible for the commuter expense tax deduction.

Apprenticeship Tax Credit Reforms
Expands the occupations for which this workforce development credit is available.

Senior Property Tax Volunteer Program
Increases from $1,500 to $2,000 the maximum that municipalities may allow certain seniors to reduce their property tax by participating in the senior work-off program.

Single Sales Factor
Moves from a sales tax apportionment system that factors in property, payroll, and sales to an apportionment that only considers sales.

If you have any questions about how these changes affect your personal tax situation, please let us know.  Thank you again for having us be your CPA!