For tax years beginning on or after January 1, 2001, an owner or renter of a principal residence located in Massachusetts who is age 65 or older at the close of the taxable year may be eligible to claim a refundable credit against personal income taxes. Known as the "circuit breaker credit," this credit is based upon the actual real estate taxes or rent paid by a taxpayer eligible to claim the credit. See G.L. c. 62, § 6(k), added by sections 80 and 81 of chapter 127 of the Acts of 1999. This TIR updates TIR 01-19 by providing the income and assessed valuation threshold amounts and the maximum credit amount for tax year 2005.
II. 2005 Income Threshold Amounts for Renters and Homeowners
A Massachusetts taxpayer age 65 or older that owns or rents his or her principal residence is eligible for the circuit breaker credit if he or she meets certain requirements. See TIR 01-19, Real Estate Tax Credit for Certain Persons Age 65 and Older.
Under G. L. c. 62, § 6(k) for purposes of calculating the circuit breaker credit, total income and maximum credit thresholds are adjusted annually by multiplying the statutory base amounts of these thresholds by the cost-of-living adjustment for the calendar year in which the taxable year begins. For tax year 2005, the taxpayer's "total income" cannot exceed $45,000 for a single individual who is not the head of a household, $56,000 for a head of household, and $67,000 for a husband and wife filing a joint return. For subsequent tax years, the Department of Revenue ("Department") will adjust the "total income" thresholds to reflect inflation. See G. L. c. 62, § 6(k)(4).
III. 2005 Assessed Valuation Threshold Amount for Homeowners
Under G. L. c. 62, § 6(k), as revised by chapter 136 of the Acts of 2005, the assessed valuation for tax year 2005, before the residential exemptions but after abatements, of the homeowner's principal residence may not exceed $600,000. If the taxpayer owns more than one acre of land, only the assessed value of the principal residence, together with the land that immediately surrounds and is associated with that residence, not to exceed one acre, should be used in determining the eligibility of the taxpayer for the credit.
For tax years beginning on or after January 1, 2006, the Department shall adjust the assessed value threshold limit by an amount equal to the valuation limit multiplied by the cost-of-housing adjustment and announce the adjusted figure in the annual update technical information release.
V. Calculation of the Credit Available in 2005
The credit is equal to the amount by which 25% of the rent actually paid by the taxpayer during the taxable year for the occupancy of the principal residence exceeds 10% of the taxpayer's total income for the taxable year, provided that such amount does not exceed the maximum credit amount. For tax year 2005, the maximum credit amount is $840.
The credit is equal to the amount by which the taxpayer's property tax payments in the current tax year, including water and sewer use charges paid to a municipality, but excluding any abatement or exemption granted, exceeds 10% of the taxpayer's total income for the taxable year, provided that such amount does not exceed the maximum credit amount. For tax year 2005, the maximum credit amount is $840.
/s/ Alan LeBovidge
Commissioner of Revenue
November 30, 2005
Revised TIR 05-17