MA Tax law changes

Summary of Significant Changes to Massachusetts Tax Law

In addition to changes in the estate tax this month, there were significant changes made to many Massachusetts tax laws. Here’s a summary of some of the more important changes:

Estate Taxes

The threshold for a taxable estate is increased from $1,000,000 to $2,000,000 effective for decedents dying on or after January 1, 2023. Estates of decedents who died in early 2023 should consider filing for an extension of time to file to await revised tax forms. Estates of decedents who died after January 1, 2023, but have already filed an estate tax return, should follow up with the Department of Revenue. The Commonwealth may be issuing automatic refunds.  

Married Couples Filing Joint Federal Income Tax Returns

A married couple filing a joint federal income tax return must now file a joint state income tax return. Previously, couples were able to file joint federal returns and separate state income tax returns, which incentivized high income couples who both receive income to file separately in Massachusetts to avoid the 4% surcharge (Millionaire’s Tax) on up to another $1,000,000 of income return. 

Short-Term Capital Gains

Short-term capital gains will now be taxed at 8.5%, a reduction from the previous 12%. 

Increased Rental Deduction, Child Tax Credit, Senior Circuit Breaker Tax Credit, Title V (Septic) Tax Credit

The Massachusetts rental deduction increases from $3,000 to $4,000. The child tax credit increases from $180 to $310 for 2023 and $440 beginning in 2024 and is no longer capped at two dependents. The Senior Circuit Breaker Tax Credit also doubled from $1,200 to $2,400 and is now indexed to inflation. The Title V (Septic) Tax Credit triples maximum credit to $18,000, increases the 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.  

Simplified Business Taxes

This change shifts corporate excise tax assessments from a three-factor apportionment system based on the business’s share of sales, payroll, and property in Massachusetts, to apportionment based solely on sales. This change is advantageous for companies with significant property and payroll in Massachusetts. Companies will not be penalized with higher taxes for investing or hiring in Massachusetts. 

Municipal Affordable Housing Property Tax Exemption

This provision allows municipalities to adopt local property tax exemptions for affordable real estate.

Changes to Refunds Required under Chapter 62F

If in the future Massachusetts is required to refund excess income tax revenues to taxpayers, those refunds will now be issued to all taxpayers equally, instead of in proportion to the amount of income taxes paid. The last required refund under this law was issued for Fiscal Year 2022. 

There are many other significant changes to the Massachusetts tax code as a result of the new law. If you have questions about how these changes will impact your family or business, we encourage you to reach out to one of the attorneys at Seder & Chandler.