Bill includes $561.3 million in tax relief in FY2024, $1.02 billion in FY2027 and beyond
BOSTON—With the goal of providing financial relief to families across the Commonwealth while making Massachusetts more competitive with other states, State Senator Nick Collins and State Representative David Biele joined their colleagues in the Massachusetts Legislature in voting to overwhelmingly pass a bipartisan tax relief package supporting residents across all income levels on Thursday.
“This compressive tax relief package reflects our commitment to providing meaningful financial benefits to individuals, families, and businesses across the Commonwealth. We need to continue to support legislation that provides real relief to taxpayers and stimulates our economy,” said Senator Collins
“This comprehensive tax package will provide permanent relief to individuals and families in our neighborhood and across the state, while making Massachusetts more competitive for businesses and workers,” said Rep. Biele. “I was proud to join my colleagues in the Legislature in passing this legislation which will provide meaningful, financial benefits to meet the needs of our residents.”
The compromise bill includes the following tax changes:
- 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.
- 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.
- Earned Income Tax Credit (EITC): The 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: The 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: The 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.
The bill also adjusts the Stabilization Fund cap, allowing the Commonwealth’s savings account to retain more funding. In addition, the bill requires married taxpayers who file a joint return with the federal government to file a joint state return, subject to exemptions or adjustments promulgated by the Department of Revenue (DOR).
Having passed the House of Representatives and Senate, the bill now goes to the Governor for her consideration.