BOSTON – Thursday, July 14, 2022 – As part of a recently passed economic development bill, the Massachusetts House of Representatives passed the most substantial tax relief package in a generation. In an effort to give back to all residents in Massachusetts, the House passed both one-time rebates and significant tax relief beginning in 2023.
“I was so proud to support this tax relief bill for the citizens of the Commonwealth,” said State Representative Richard M. Haggerty (D-Woburn). “The taxpayer rebate checks will help residents and families deal with rising inflation and the cost of gasoline. The permanent changes to our tax code will make our tax system fairer for residents and make our state more economically competitive. I am so pleased that this legislation will directly help seniors, families, and renters in my district.”
Taxpayer Energy & Economic Relief Fund
Following $500 million worth of premium pay bonuses for low-income workers that were issued in March and June of 2022 under the Legislature’s Essential Employee Premium Pay Program, the economic development bill passed by the House includes one-time rebates of $250 for a taxpayer who files an individual return, and $500 for married taxpayers who file joint returns that will be issued before September 30, 2022. These rebates are expected to be issued to about two million Massachusetts residents who reported earning between $38,000 and $100,000 for individual filers, and between $38,000 and $150,000 for joint filers in 2021. The one-time rebates will not be subject to state’s personal income tax.
Permanent Tax Changes
The bill passed makes significant changes to the Massachusetts tax code to provide structural relief to millions of residents across all income levels. These include:
•Increasing the Child and Dependent Care Credit from $180 per child to $310 per child, as well as eliminating the current cap of $360 for two or more children. This is expected to impact over 700,000 families.
•Increasing the Earned Income Tax Credit (EITC) from 30 percent to 40 percent of the federal credit. This is expected to impact about 396,000 taxpayers with incomes under $57,000.
•Increasing the Senior Circuit Breaker Tax Credit from $750 to $1,755. Currently, the Department of Revenue caps this credit at $1,170 due to cost-of-living adjustments over the $750 set in statute. Increasing it to $1,755 in statute is expected to impact over 100,000 taxpayers who own or rent residential property in Massachusetts as their principal residence.
•Increasing the rental deduction cap from $3,000 to $4,000. This is expected to impact about 881,000 taxpayers.
•Increasing the estate tax threshold from $1 million to $2 million and eliminating the “cliff” effect which would tax just the value of the estate that exceeds $2 million, not the entire estate. This is expected to impact about 2,500 taxpayers.