Here’s what’s in the tax relief law Healey signed this week

Gov. Maura Healey signed a $1 billion-a-year tax relief bill that advocates argue is the most significant tax reform in Massachusetts in more than two decades.

The law will cost the state $561 million in fiscal year 2023 and $1 billion a year starting in fiscal year 2027. It includes cuts to the short-term capital gains tax and boosts to multiple housing-related initiatives like the rental deduction.

Lawmakers worked in changes to a range of tax credits to the law. Here’s what’s in the new law.

Rental Deduction

The rental deduction cap was increased from $3,000 to $4,000, a change lawmakers said would help roughly 800,000 renters across the state as prices increase.

Children and Dependents

Lawmakers increased the tax credit for a dependent child, disabled adult, or senior from $180 to $310 for the 2023 tax year, and then to $440 in tax year 2024 and beyond. The child and dependent cap was eliminated.

“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,” House Speaker Ronald Mariano’s office said.

Investments

The law reduces the state’s short-term capital gains tax from 12% to 8.5%, a move that has been criticized by progressives as giving breaks to the wealthy but supported by the business community as making Massachusetts more competitive.

Dairy Farmers

The statewide cap on the dairy tax credit was increased from $6 to $8 million “to provide more assistance for local farmers during downturns in milk prices,” Mariano’s office said.

Low Income Housing

The law boosts the annual authorization for the low income housing tax credit 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 activity and ancillary market-rate housing,” according to Mariano’s office.

Senior Citizens

Lawmakers doubled the maximum senior circuit breaker credit from $1,200 to $2,400, a move that officials said would make it easier for 100,000 seniors “who struggle with high housing costs to stay in their homes.”

Septic Systems, Cesspools

The law triples the maximum Title V cesspool or septic system tax credit from $6,000 to $18,000 and increases the amount claimable to $4,000 per year, “easing the burden on homeowners facing the high cost of septic tank replacement or repair,” lawmakers said.

Earned Income

Lawmakers increased the earned income tax credit from 30% to 40% of the federal credit.

“This increased authorization cap provides enough funding to spur the creation of thousands of new units of affordable housing annually while also bolstering economic activity and ancillary market-rate housing,” Mariano’s office said.

Related Posts