On Wednesday, October 4, 2023, Massachusetts Governor Maura Healey signed into law a widespread tax relief bill. The relief package, which is created to provide $561 million in reductions to individuals and corporations during the current fiscal year, will reach $1 billion in relief by fiscal year 2027 when it is fully implemented. The bill enacts the first tax cuts in over 20 years for the Commonwealth.
Below are some of the key changes from the legislation:
Estate Tax Exemption
The new legislation increases the estate tax exemption from $1 million to $2 million. Only estates valued over $2 million by the Commonwealth will be taxed and only the difference above $2 million will be taxed, as opposed to the entire estate.
Short-term Capital Gains
Under the new bill, the Massachusetts capital gain tax will be reduced from 12% to 8.5% for the sale of assets held for less than a year.
2023 Massachusetts Child Tax Credit
The bill expands the Massachusetts child tax credit in two major ways:
- There is no longer a limit to how many eligible dependents taxpayers can claim. Previously, residents were limited to claiming two dependents regardless of the number of children in their household.
- For the 2023 tax year, the tax credit will increase from $180 to $310 for each child or dependent. The credit will increase to $440 for each eligible dependent for the 2024 tax year.
Earned Income
Low-income earners will see an increase in the amount they receive as part of the earned income tax credit. The new legislation raises the percentage from 30% to 40% of the federal credit.
Joint Filing Requirement
Effective January 1, 2024, married couples who joint file their federal taxes must also joint file a Massachusetts return.
Rental Deduction Increases
Eligible renters can now deduct up to $4,000 if they pay at least $8,000 in rent for the year (previously maximum was $3,000 or 50% of $6,000).
The tax relief bill also includes increases to the senior circuit breaker credit and septic system credit along with other benefits for commuters and home owners.
Please reach out to your Newburg CPA tax professional with any questions regarding how the new legislation impacts you. We are happy to help.
Sources
https://www.kiplinger.com/taxes/whats-in-the-massachusetts-tax-relief-bill
https://www.wcvb.com/article/gov-maura-healey-massachusetts-tax-cuts/45439548
https://apnews.com/article/massachusetts-tax-relief-package-healey-5714fd180bae6fbea3ef7650e8638c7b