On September 28, 2023, State Senator Jason Lewis and State Representatives Steve Ultrino, Kate Lipper-Garabedian and Paul Donato joined their colleagues in the Massachusetts Legislature to overwhelmingly enact a bipartisan tax relief package to help make living in Massachusetts more affordable for working families and seniors and to bolster our state’s economic competitiveness. An Act to improve the Commonwealth’s competitiveness, affordability, and equity phases in a series of tax reforms expected to provide $561 million in taxpayer savings in the current fiscal year and grow to approximately $1 billion in tax relief by fiscal year 2027. The Senate and House both passed their versions of the bill earlier this year and reconciled differences in their versions before enacting the bill. The bill is now on Governor Maura Healey’s desk for her signature and/or other actions.
The bill substantially increases the child and dependent tax credit, senior circuit breaker tax credit and earned income tax credit. The bill also reforms the Massachusetts estate tax by raising the threshold to $2 million and eliminating the current cliff effect. A number of housing production tax credits are also expanded to help spur the creation of more market-rate (in gateway cities) and affordable housing units.
“The goal of this bill is to help low-income residents, working families, and seniors afford the high cost of living in Massachusetts,” said Senator Lewis. “Substantially increasing the child and dependent, senior circuit breaker, and earned income tax credits, along with estate tax reform and increased housing production will make the Commonwealth more affordable and equitable. I’m particularly pleased that an important provision that I advocated for – to close a loophole in the new millionaire’s tax that voters approved last November – was also included in the final bill.”
“I am pleased to see the tax relief package pass both the House and Senate. This legislation will not only provide much-needed financial relief to our residents and businesses, it will also ensure that our great Commonwealth remains competitive and affordable in the future,” said Representative Ultrino. “With this, I applaud the hard work and diligent efforts of Speaker Mariano, the Malden Delegation, and my colleagues in the House and Senate.”
“With a primary focus on affordability and equity, this bill is an important step in ensuring Massachusetts is an affordable place to live for all,” said Representative Donato. “Additionally, I am proud of my colleagues for overwhelmingly passing this essential piece of legislation.”
“I was pleased to join the full Legislature in passing this comprehensive tax reform package to make the Commonwealth more affordable for its residents and more economically competitive nationally by providing critical relief to seniors, families, renters, and businesses,” said Representative Lipper-Garabedian. “Among the many important updates to our tax code, I am enthused to see the inclusion of a significant number of housing-related reforms addressing supply and affordability, including the increased rental tax credit, a piece of legislation I have filed and championed since joining the Legislature in 2020.”
Among other provisions, this tax relief bill:
- Increases the child and dependent tax credit from $180 to $310 in taxable year 2023, and then to $440 in taxable year 2024 and beyond, while eliminating the current cap on children/dependents, benefitting more than 565,000 families and providing the most generous universal child and dependent tax credit in the country
- Increases the earned income tax credit from 30% to 40% of the federal credit
- Doubles the maximum annual senior circuit breaker credit from $1,200 to $2,400
- Increases the cap on the rental deduction from $3,000 to $4,000
- Raises the estate tax threshold from $1 million to $2 million and establishes a uniform credit of $99,600 in order to eliminate the current cliff effect
- Increases the Housing Development Incentive Program (HDIP) statewide cap from $10 million to $57 million once, and then to $30 million annually, which will create an estimated 12,500 new homes in Gateway Cities
- Raises the annual low-income housing tax credit authorization cap from $40 million to $60 million, providing increased funding for new affordable housing units
The bill also includes a requirement that married couples who file a joint tax return with the federal government also file a joint state tax return. This provision – which aligns Massachusetts with many other states – was championed by Senator Lewis and is intended to close a tax avoidance loophole in the new millionaire’s tax that was approved by voters last November.
A few additional key tax changes:
- Lead paint abatement: Doubles the credit to $3,000 for full abatement and $1,000 for partial abatement, to support families with older homes.
- Student loan repayment exemption: Ensures that employer student loan payments are not treated as taxable compensation.
- Commuter transit benefits: Makes public transit fares, as well as ferry and regional transit passes and bike commuter expenses, eligible for the commuter expense tax deduction.
• Senior property tax volunteer program: Increases from $1,500 to $2,000 the maximum that municipalities may allow for certain seniors to reduce their property tax by participating in the senior work-off programs.