A proposed tax relief initiative in Massachusetts may offer up to $440 per child residing within the state. This eagerly anticipated plan, aiming to provide over $1 billion in tax relief by fiscal year 2027, encompasses several key reforms, most notably an overhaul of the child tax credit. Senate President Karen Spilka and House Speaker Ron Mariano have emphasized that this credit will also extend to dependent disabled adults and seniors.
The current credit, set at $180, is set to increase to $310 this year, followed by a boost to $440 in 2024. Legislators are heralding this bill as the nation’s most generous universal child and dependent tax credit. The comprehensive proposal, set to exceed $1 billion in tax relief by the time it’s fully implemented in 2027, includes more than a dozen specific tax-related provisions.
Groundbreaking Tax Relief Proposal What Families and Businesses Need to Know
These range from exempting estates under $2 million from taxes to elevating the child and dependent tax credit from $180 to $330 per child or dependent in the present tax year, eventually reaching $440 in the 2024 tax year. According to CBS News, this enhanced child tax credit is expected to benefit around 565,000 families, marking it as the most generous universal child and dependent tax credit in the country.
Senate President Karen Spilka declared it the most substantial bipartisan legislative tax relief proposal in decades and emphasized how it would significantly ease the financial burdens faced by families, seniors, and renters, placing tangible funds in their hands. She further noted that a low-income household with two children could anticipate a tax credit exceeding $1,000, describing it as one of the most impactful programs in her experience, particularly for those not subject to state taxes.
House Speaker Mariano underscored the significance of enabling households to retain money and stay in their homes, even if they don’t pay state taxes. The bill is anticipated to pass both the House and Senate, with votes scheduled for this week. Subsequently, it will be forwarded to Governor Maura Healey, who has expressed her intent to sign it.
Governor Healey acknowledged the comprehensiveness of the package, which offers relief to families and businesses, including through the proposed Child and Family Tax Credit. She stated her anticipation of reviewing the finer details of the bill in a written statement obtained by the outlet.
Understanding Better the Massachusetts Tax Relief Program
Last August, 2023, Governor Healey signed the $56.2 billion state budget which allocates earmarked a substantial $581 million for tax relief measures, addressing various aspects of taxation. Notably, the newly enacted tax plan for the 2024 fiscal year is estimated to cost approximately $561.3 million, with projections foreseeing this figure soaring to a substantial $1 billion by 2027 when the reforms reach full implementation.
One key feature of this legislation is the relief it offers to Massachusetts estates, introducing a uniform credit of $99,600 designed to eliminate tax liability for estates valued under $2 million. This represents a significant departure from the previous tax regime that imposed levies on estates valued at $1 million or more.
These changes aim to alleviate the financial burden on estate holders. Simultaneously, the legislation closes a loophole used by high-earning married couples to mitigate the 4% millionaire’s surtax. It mandates that married taxpayers who file joint returns with the IRS must also do so with Massachusetts, ensuring a fairer tax system.
Additionally, the legislation reduces the short-term capital gains tax rate from 12% to 8.5%, providing further financial relief. Furthermore, this legislation makes a substantial shift in the corporate income tax apportionment formula, transitioning most companies from a three-factor calculation to a single sales factor.
Although previously limited to manufacturing, eligible defense contractors, and specific financial service providers, this move aims to foster a more accommodating tax environment for a broader spectrum of industries, prompting companies beyond the traditional scope to assess the potential benefits of this transition in their Massachusetts tax obligations.
The Earned Income Tax Credit in Massachusetts
In “The Bay State”, the Earned Income Tax Credit (EITC) is a state-level tax benefit designed to provide financial assistance to low and moderate-income individuals and families. It is a refundable tax credit that can significantly reduce the amount of state income tax owed or even result in a tax refund for eligible taxpayers.
To qualify for the Massachusetts EITC, individuals and families must meet certain income requirements, which are subject to change each tax year. Generally, those with lower incomes and larger families are more likely to be eligible for a higher credit amount. The credit is designed to incentivize work and provide additional financial support to those who are employed but may struggle to make ends meet. In Massachussets, the EITC will rise from 30% to 40% of the federal credit, according to this bill.
How can I qualify for the proposed tax relief initiative in Massachusetts?
The Massachusetts tax relief bill includes several measures designed to provide tax breaks to residents at all income levels. Here’s how you can qualify for the different components of the tax relief initiative:
Child tax credit
The bill includes an expanded child tax credit, which eliminates the maximum number of eligible dependents that can be claimed. The credit amount will increase from $180 to $310 per dependent for the 2023 tax year and $440 per eligible dependent for the 2024 tax year. There is no cap on the number of eligible dependents.
Estate tax credit
The estate tax exemption has increased from $1 million to $2 million. That means estates valued at under $2 million won’t be taxed by Massachusetts.
Capital gains tax relief
The Massachusetts capital gains tax, previously 12%, is reduced to 8.5% under the bill.
Senior circuit breaker tax credit
The maximum senior circuit breaker tax credit, a refundable credit for older adults based on real estate taxes or rent paid on residential property owned or rented as a principal residence, has been raised from $1,200 to $2,400.
General tax refund
To qualify for the general tax refund, residents need to file their 2021 state tax returns on or before Oct. 17. The refund will be distributed automatically as a check in the mail or through direct deposit. The credit will likely hover around 13% of an individual’s personal income tax liability for 2021.