(BOSTON – 9/28/23) With the goal of providing financial relief to families across the Commonwealth while making Massachusetts more competitive with other states, the Massachusetts Legislature overwhelmingly passed a compromise $561.3 million bipartisan tax relief package supporting residents across all income levels on Thursday.
Senator Velis, who filed his own tax relief legislation this session to increase the Dependent Tax Credit, the Senior Circuit Breaker Tax Credit, and the Estate Tax Threshold, joined his colleagues in voting for the legislation which was passed after three months of negotiations between the House and the Senate.
“Like so many of my colleagues, I continue to hear from residents in my communities about the high costs their families are dealing with, and the tangible impact that the tax reform initiatives in this bill will have on their lives,” said Senator Velis (D-Westfield). “From providing comprehensive relief to families, seniors, and renters, to expanding housing development and making Massachusetts more attractive to businesses, this is the most significant reform to our Commonwealth’s tax code in a generation and I am thrilled that we are sending this important legislation to the Governor’s desk.”
Child and Dependent Tax Credit
The bill increases the refundable tax credit for a dependent child, disabled adult, or senior from $180 to $310 per dependent in taxable year 2023, and then to $440 in taxable year 2024 and beyond, while eliminating the child/dependent cap. This expanded credit, which will benefit more than 565,000 families, will be the most generous universal child and dependent tax credit in the country.
Estate Tax
Massachusetts’ current estate tax, which has not been updated in many years, has become an outlier in several ways. The changes made in this bill update the tax to bring it more in line with other states and eliminate punitive elements of the tax for those with incomes just high enough to trigger it. The bill 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.
Earned Income Tax Credit (EITC)
This bill increases the refundable Earned Income Tax Credit (EITC) from 30 per cent to 40 per cent of the federal credit. This increase will provide crucial support to working individuals and families, benefitting nearly 400,000 taxpayers with incomes under $60,000.
Single Sales Factor Apportionment
Currently, most businesses in Massachusetts are subject to a three-factor apportionment based on location, payroll, and receipts. To support companies headquartered in Massachusetts, this bill establishes a single sales factor apportionment in the Commonwealth based solely on receipts, matching what 39 other states currently do.
Senior Circuit Breaker Tax Credit
This bill doubles the refundable senior circuit breaker tax credit, which supports limited-income seniors facing high rents or real estate taxes, from $1,200 to $2,400. This change is expected to impact over 100,000 seniors across Massachusetts.
Rental Deduction Cap
This bill increases the rental deduction cap from $3,000 to $4,000. This is expected to impact about 800,000 Massachusetts taxpayers.
Short-Term Capital Gains Tax
At 12 per cent, Massachusetts is among the states with the highest short-term capital gains tax rate, and taxes short-term capital gains at a higher rate than long-term capital gains. The bill lowers the short-term capital gains tax rate to 8.5 per cent.
Housing Development Incentive Program (HDIP)
The bill increases the statewide cap from $10 million to $57 million for 2023, and subsequently to $30 million annually, which will provide Gateway Cities with an expanded tool to develop market rate housing. This increase is estimated to create 12,500 new homes in Gateway Cities and spur over $4 billion of private investment in these communities.
Low Income Housing Tax Credit
This bill raises the annual authorization from $40 million to $60 million. This increased authorization cap provides enough funding to spur the creation of thousands of new units of affordable housing annually while also bolstering economic development.
Local Option Property Tax Exemption for Affordable Housing
This new policy will permit 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 level set by the community.
Title V Cesspool or Septic System Tax Credit
This bill will triple the maximum credit from $6,000 to $18,000 and increases the amount claimable to $4,000 per year, easing the burden on homeowners facing the high cost of septic tank replacement or repair.
Additional Tax Changes
- 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 $6 million to $8 million, 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.
- Cider Tax: Raises the maximum amount of alcohol for these classes of drinks to 8.5 per cent, allowing more locally produced hard cider and still wines to be taxed at a lower rate.
- Senior Property Tax Volunteer Program: Increases from $1,500 to $2,000 the maximum that municipalities may allow for certain seniors to reduce from their property tax by participating in the senior work-off program.
Having passed the House of Representatives and Senate, the bill now goes to the Governor for her consideration.
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