The recently passed tax relief and reform package in Massachusetts is worth $1 billion and is designed to provide tax relief to a wide range of residents and businesses. The law includes a number of provisions, including:
- Reduced Estate Tax: The law doubles the estate tax exemption from $1 million to $2 million. To address the “cliff effect,” there is a new credit of $99,600 that exempts estates below $2 million from taxes.
- Reduced Capital Gains Tax: The law reduces the capital gains tax rate from 12% to 8.5%.
- Increased Child and Dependent Tax Credit: The child and dependent tax credit will increase from $180 to $330 per child or dependent in the current tax year, and then to $440 for the 2024 tax year.
- Senior Circuit Breaker Tax Credit: The law doubles the Senior Circuit Breaker Tax Credit, which provides tax relief to seniors on fixed incomes from $1,200 to $2,400.
- Rental Deduction: The law increases the cap on the rental deduction from $3,000 to $4,000.
- Expanded Earned Income Tax Credit (EITC): The law increases the EITC from 30% to 40% of the federal credit. This will provide tax relief to low- and middle-income families, many of whom are struggling to make ends meet.
- Change in business tax calculations: Massachusetts businesses will need to change how they calculate their taxes. Instead of the historical method of using three factors, property, payroll, and sales, they will now use one factor: sales. Many other states use the sales-only factor, which tends to benefit in-state businesses.
The law is expected to take effect in 2024. Proponents for the law say it will help to make Massachusetts a more attractive place to live and work as it will provide tax relief to millions of Massachusetts residents.
Michael Callahan
