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Boston's Morning Newsletter
Here's what parents, renters, seniors and more would save under the new Mass. tax cut bill
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Twenty months later, the Massachusetts tax cut bill is nearing the finish line.
After their latest round of negotiations, top Democrats in the State House unveiled a new $1 billion compromise tax package yesterday — and for all intents and purposes, this is the one you want to pay attention to. The bill is expected to breeze through the House and Senate to Gov. Maura Healey’s desk by the end of this week.
So, wondering how much money you’ll save? The bill has a little something — or, in some cases, a lot of something — for almost everyone. Here’s a breakdown of some of the biggest provisions:
For parents and caregivers: Massachusetts currently lets parents and guardians claim a tax credit of up to $240 for each child they have under the age of 13 — as well as dependents over the age of 65 and disabled dependents of any age. The new bill increases the credit to $310 per dependent for the 2023 tax year (i.e. the taxes you’ll file this coming spring) and then up to $440 for tax year 2024 and beyond.
- That means an eventual savings of $200 per child if you’re a parent already taking full advantage of the current credit.
- Additionally, the bill eliminates the current credit’s limit of two qualifying dependents, meaning potentially even more savings for those with three or more kids. For example, a couple with four kids would get an additional $1,280 a year starting in the 2024 tax year.
For lower-income residents: The bill would increase Massachusetts’ earned income tax credit (EITC) for low-income residents, from 30% of the federal EITC to 40%.
- The impact depends on your personal circumstances. For example, if you’re single with no kids and made the maximum qualifying amount for the EITC last year ($16,480), you’d save an additional $56. But if you’re a parent of two making the maximum ($49,399), you’d save over $600 more a year.
For seniors: Massachusetts allows lower-income residents aged 65 and older to claim a $1,200 credit on their taxes. The bill doubles that credit to $2,400.
- For the last tax year, the income limit for the credit was $64,000 for a single individual and $96,000 for a married couple filing jointly. It’s worth noting the eligibility rules depend on exactly how much you pay in property taxes or rent. But if you qualify, the change means you save another $1,200 a year.
For renters: Massachusetts currently lets renters write off 50% of their rent from their taxes each year, up to $3,000. The bill increases that maximum deduction to $4,000.
- If you pay more than $8,000 in rent a year (and who doesn’t if you rent in the Boston area), the increased deduction means you’ll save an extra $50 a year.
For heirs: The current Massachusetts estate tax — which Healey and others have criticized for making the state an “outlier” — imposes a one-time, graduated tax on inheritances valued at or above $1 million when they are passed down after the owner dies. It applies to everything from financial assets to physical property like homes, cars and jewelry. Under the new tax deal, the threshold would go up to $2 million. The bill also includes a uniform credit of $99,600 to eliminate the “cliff effect” for estates just above the threshold.
- If you have an estate above the newly proposed $2 million threshold, it would mean a savings of around $99,000.
For investors: If you buy a stock and sell it within a year in Massachusetts, your profits get hit with the state’s 12% short-term capital gains tax. The new bill brings that rate down to 8.5%, a little closer to the state’s 5% tax on long-term capital gains.
- The impact here depends on the amount of short-term investing you’re doing. For example, if you made $10,000 off buying and selling stocks within the last year, you’d save $350. (It’s also worth noting the top 1% of households in Massachusetts would receive most of the benefit of this tax cut, according to an analysis by a local left-leaning think tank.)
Wait, there’s more: The bill also includes a raft of more narrow — but sometimes still sizable — perks for everyone from low-income housing developers to hard cider makers to residents trying to replace their septic tanks. (Topical!)
- Read the full summary of the bill and an analysis of how the Senate and House compromised in different areas.
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