Governor Maura T. Healey recently signed into law Massachusetts' first tax cuts in over 20 years on 10/4/2023. This $1 billion package encompasses several crucial proposals that Governor Healey initially presented in her tax cuts proposal in March. Notably, the expanded Child and Family Tax Credit now stands as the most generous in the nation. Additionally, there are increases to the Rental Deduction, Senior Circuit Breaker Tax Credit, Housing Development Incentive Program (HDIP), and adjustments to the Estate Tax and Short Term Capital Gains, addressing areas where Massachusetts deviates from the norm in the tax code. These changes signify a significant milestone for Massachusetts, fostering a more equitable and progressive tax landscape.

The Conference Committee's plan is to offer responsible tax relief to the residents and businesses of Massachusetts, enhancing the affordability, equity, and competitiveness of the Commonwealth. The anticipated impact for fiscal year 2024 amounts to $561.3 million, with a budget impact of $519.3 million. Upon full implementation in fiscal year 2027, the estimated impact will reach $1.02 billion, with a significant on-budget impact of $969.3 million. These provisions aim to create a positive and transformative impact on the economy and fiscal landscape of Massachusetts.

• Child and Family Tax Credit – Eliminates two-dependent cap and increases credit from $180 per dependent child, disabled adult, or senior to $310 for 2023 and to $440 on a permanent basis, starting in 2024. An estimated 565,000 families will benefit, and this will be the most generous universal child and dependent tax credit in the county. 
  
• Earned Income Tax Credit (EITC) – increases credit from 30% to 40% of the federal credit 
  
• Estate Tax – increases threshold from $1 million to $2 million with a credit that mitigates cliff effect 
  
• Short-Term Capital Gains – reduces rate from 12% to 8.5% 
  
• Rental Deduction – increases cap from $3,000 to $4,000 
  
• Senior Circuit Breaker Tax Credit – doubles credit, indexed to inflation, which equates to an increase from $1,200 to $2,400 
  
• Single Sales Factor – shifts from three-factor apportionment system based on business’s share of sales, payroll, and property to apportionment based solely on sales 
• Low-Income Housing Tax Credit (LIHTC) – increases annual program cap from $40 million to $60 million 
• Housing Development Incentive Program (HDIP) – increases annual program cap from $10 million to $57 million in 2023, and thereafter to $30 million annually 
• Student Loan Repayment Assistance – exempts employer assistance for student loan repayment from taxable income 
• Dairy Tax Credit – increases annual program cap from $6 million to $8 million 
• Cider Tax Rate – applies lower tax rates to a broadened class of beverages 
• Lead Paint Abatement Credit – doubles credit to $3,000 for full abatement and $1,000 for partial abatement 
• Title V (Septic) Tax Credit – triples maximum credit to $18,000, increases percentage of eligible expenses from 40% to 60%; and allows taxpayers to claim up to $4,000 in any year, versus $1,500 in current law 
• Deductible Commuter Transit Benefits – adds public transit fares, RTA fares and bicycle expenses to deductible commuter expenses 
• Apprenticeship Tax Credit – expands eligible occupations 
• Municipal Affordable Housing Property Tax Exemption – permits municipalities to adopt local property tax exemption for affordable real estate 
• Property Tax Liability Reduction for Senior Volunteer Services – permits municipalities to increase the maximum property tax abatement available to seniors who perform volunteer services from $1,500 to $2,000 
• Stabilization Fund Cap – increases the cap on Stabilization Fund deposit from 15% to 25.5% of budgeted revenues 
  
  

In the upcoming weeks, Governor Healey and Lieutenant Governor Driscoll will embark on a series of visits to communities throughout the state of Massachusetts. Their purpose is to ensure that all residents are well-informed about the forthcoming savings that await them. This Thursday, they will be in Gardner and Haverhill, rejoicing in the tax cuts that will benefit children and families. 

For more information about how this bill may affect your tax planning and responsibilities, contact your advisor.