Below you will find brief descriptions of major tax law changes for 2012 pertaining to personal income tax in Massachusetts. Each topic includes links to further detailed information.

Below you will find brief descriptions of federal tax law changes for 2012 that do not pertain to personal income tax in Massachusetts. Each topic includes links to further detailed information.


Section 179 Expenses

Under the American Taxpayer Relief Act of 2012 (H.R. 8), effective for tax years beginning in 2012 and 2013, the dollar limitation for an election under I.R.C § 179 to expense property in its initial year is $500,000, and the I.R.C § 179 overall investment phase-out threshold is $2,000,000. Massachusetts adopts these changes because I.R.C. § 179 is a trade or business expense deduction; these deductions are adopted by Massachusetts on a current Code basis. For more information, see:
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Brownfields Credit

An Act Relative to Economic Development Reorganization (St. 2010, c. 240), Sections 113 and 114 extend the dates for the credits as follows: the environmental response and removal costs incurred between August 1, 1998 and January 1, 2014 are eligible for the credit, provided that the taxpayer commences and diligently pursues an environmental response action before August 5, 2013. For more information, see:
TIR 10-15
Brownfields Credit


Community Investment Credit

Under An Act Relative to Infrastructure Investment, Enhanced Competitiveness and Economic Growth in the Commonwealth (Jobs Act), effective for tax years beginning on or after January 1, 2014, a credit is allowed equal to 50 percent of the total qualified investments made by a taxpayer in a “community partner,” i.e., a “community development corporation” or a “community support organization,” selected by the Department of Housing and Community Development through a competitive process. This credit is set to expire December 31, 2019. The total amount of Community Investment Credits authorized by the Department of Housing and Community Development is subject to a $3,000,000 cap in 2014 and an annual cap of $6,000,000 in 2015 to 2019, inclusive. 

A qualified investment must be in the form of a cash contribution of at least $1,000. A taxpayer may invest in more than one community partner, but may not claim more than $1,000,000 of credits in any single taxable year. A taxpayer must claim the credit in the taxable year in which a qualified investment is made.  For more information, see:
TIR 12-10
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Conservation Land Tax Credit

Per Chapter 509 of the Acts of 2008, Sections 1 - 4, effective for taxable years beginning on or after January 1, 2011, a tax credit is allowed for qualified donations of certified land to a public or private conservation agency. The credit is equal to 50% of the fair market value of the qualified donation not to exceed $50,000. This credit is available to both individuals and corporations and is refundable but not transferable. For more information, see: 
830 CMR 62.6.4
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Domicile, Charitable Deductions Not Considered in Determining Domicile

Under An Act Making Appropriations for the Fiscal Year 2013 (Fiscal Year 2013 Budget), effective July 8, 2012, charitable contributions in the form of cash or property that qualify for federal income tax deductions cannot be examined to determine a person’s domicile in Massachusetts or any other jurisdiction.

Under IRC § 170(a), qualifying charitable contributions include gifts of cash or property. Under General Laws c. 62, § 1(f), as amended, contributions of cash or property to any organization which is exempt from taxation under IRC § 501(c)(3) are excluded from a determination of domicile to the extent that such contributions qualify for a federal income tax deduction under IRC § 170(a). For more information, see:
TIR 12-10
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Earned Income Tax Credit (EITC)

The American Recovery and Reinvestment Act of 2009 (P.L. 111-5 or “ARRA”) temporarily increased the beginning and end points of the earned income tax credit (EITC), increased the credit for three or more children and made other taxpayer beneficial changes, with changes set to expire December 31, 2010. For federal income tax purposes, the Tax Relief Act of 2010 (P.L. 111-132) extends the enhanced EITC credit for two years, through December 31, 2012. The Massachusetts earned income tax credit equals 15% of the federal earned income tax credit received by the taxpayer for the taxable year. Therefore, Massachusetts allows 15% of the amount the taxpayer receives federally under IRC sec. 32. For more information, see:
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Electronic Filing and Payment Requirements 

As of January 1, 2012, income tax preparers must file all Massachusetts personal income tax returns (i.e., Forms 1 and 1-NR-PY) electronically unless the preparer reasonably expects to file 10 or fewer original Massachusetts Forms 1 and 1-NR-PY during the calendar year. Under previously issued TIR 04-30, the Commissioner required income tax return preparers who completed 100 or more original Massachusetts Forms 1 and 1-NR-PY during the previous calendar year to use electronic means to file all personal income tax returns on or after January 1, 2005. 

A tax return preparer who is over the electronic filing threshold announced here is not, however, required to file a return electronically as to a taxpayer who has specifically directed on her return that the return is  not to be filed by electronic means, as specified in TIR 04-30.  DOR may impose a further requirement on practitioners who are over the electronic filing threshold and who are filing paper returns. These practitioners may be required to obtain taxpayer signatures on a separate form, as described in TIR 05-22, that directs the practitioner to file a paper tax return.   Practitioners subject to this requirement must maintain this acknowledgement and produce it for DOR upon request. For more information see:
TIR 11-13
E-File Information


Employer Wellness Program Credit

Under An Act Improving the Quality of Health Care and Reducing Costs through Increased Transparency, Efficiency and Innovation (Health Care Act), effective for tax years beginning on or after January 1, 2013, a credit is allowed equal to 25 percent of the costs associated with implementing a “certified wellness program.”  The maximum amount of credit available to a taxpayer is $10,000 in any tax year. This credit is set to expire on December 31, 2017.  The total amount of Employer Wellness Program Credits authorized by the Department of Public Health is subject to a $15,000,000 annual cap. For more information, see:
TIR 12-10
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Extensions Relating to Farmers and Fisherman

The Massachusetts Department of Revenue is following the IRS in its treatment of farmers and fishermen as it relates to the penalty for Underpayment of Estimated Income Tax. For the 2012 tax year, farmers or fishermen who miss the March 1, 2013 deadline will not be subject to the penalty if they file and pay by April 16, 2013. This exception to the penalty is explained on Form M-2210. If you qualify for this exception, be sure to include Form M-2210 with your tax return, whether you file electronically or on paper. For more information, see
IRS Notice 2013-5
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Extensions Relating to Hurricane Sandy

The Massachusetts Department of Revenue will grant automatic extensions of time until February 1, 2013 for certain tax filings and payments otherwise required to be made by certain nonresident individual and business taxpayers and other affected taxpayers, between October 29, 2012 and January 31, 2013.  As of November 3, 2012, the President of the United States declared a disaster area for certain counties and municipalities in Connecticut, New Jersey, New York, and Rhode Island due to Hurricane Sandy which struck those areas in late October, 2012.  For more information, see:
TIR 12-9
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Health Insurance, Penalty for Failure to Purchase - Tax Year 2012

Pursuant to G.L. c. 111M, s. 2, the Massachusetts Health Care Reform Act requires most adults 18 and over with access to affordable health insurance to obtain it. In 2012, individuals must be enrolled in health insurance policies that meet minimum creditable coverage standards defined in regulations adopted by the Commonwealth Health Insurance Connector Authority (the Connector). Individuals who are deemed able to afford health insurance but fail to comply are subject to penalties for each month of non-compliance in the tax year (provided that there is no penalty in the case of a lapse in coverage of 63 consecutive days or less). The penalties, which will be imposed through the individual's personal income tax return, shall not exceed 50% of the minimum monthly insurance premium for which an individual would have qualified through the Connector.

These penalties apply only to adults who are deemed able to afford health insurance. On an annual basis, the Connector establishes separate standards that determine whether individuals, married couples and families can afford health insurance, based on their incomes and affordable health insurance premiums. Those who are not deemed able to afford health insurance pursuant to these standards will not be penalized. Individuals also have the opportunity to file appeals with the Connector asserting that hardship prevented them from purchasing health insurance (and thus that they should not be subject to tax penalties). For more information, see:
830 CMR 111M.2.1
TIR 12-7 (updates and replaces TIR 12-2)
Health Care Information 
Commonwealth Health Connector
Schedule HC pdf format of HC.pdf
 Schedule HC Instructions, including Schedule HC and Health Care Penalty Worksheet pdf format of HC instr.pdf
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Health Savings Accounts

Massachusetts adopts the federal deduction allowed to individuals for contributions to a Health Savings Account, subject to federal limitations which are adjusted annually for inflation. Health Savings Accounts (HSAs) are designed to help individuals save for future qualified medical and retiree health expenses on a tax-free basis. For calendar year 2012, the maximum annual aggregate contribution is equal to $3,100 for an individual plan or $6,250 for a family plan.

The contribution limitations are increased for individuals age 55 or older (but not covered by Medicare) by the end of the calendar year. For calendar year 2012, the maximum annual aggregate contribution for an individual age 55 or older is equal to $4,100 for an individual plan or $7,250 for a family plan. For more information, see:
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Human Organ Donation Expense

Pursuant to Chapter 68 of the Acts of 2011, effective for tax years beginning on or after January 1, 2012, individuals who donate organs to other persons for human organ transplantation may claim an amount equal to the following expenses incurred and related to the organ donation: (i) travel expenses; (ii) lodging expenses; and (iii) lost wages not to exceed $10,000. “Human organ” means all or parts of human bone marrow, liver, pancreas, kidney, intestine or lung. Part-year and nonresidents are not eligible to claim this deduction. For more information, see:
TIR: 11-6
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Income Tax Paid to Another Jurisdiction Credit - Mandatory Payments

Mandatory contributions imposed by the Rhode Island Temporary Disability Insurance Act (the “Act”) qualify as income taxes paid to the state of Rhode Island for the purposes of the OJ credit. Letter Ruling 77-10, in which the Commissioner ruled that payments made under the Rhode Island Temporary Disability Insurance Act were not the type of income taxes referred to in G.L. c. 62, § 6(a) has been revoked.

To recalculate the credit, the Rhode Island State Disability Insurance (RISDI) should be included as part of the total tax paid to Rhode Island; the computation of the credit is based on comparing the Massachusetts income tax on income reported to Rhode Island to the actual tax plus any RISDI paid; the credit is limited to the smaller of these two amounts.  For more information, see:
Revised DD 12-1
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IRA, Conversion of a Traditional IRA to a Roth IRA Completed in 2010

Under the Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222), taxpayers regardless of income level are allowed to convert traditional IRAs to Roth IRAs per  I.R.C. § 408A effective for tax years beginning after December 31, 2009. Previously, only taxpayers with federal adjusted gross incomes of $100,000 or less could exercise this option. 

  • For Roth IRA conversions completed in 2010, under IRC § 408A(d)(3): for federal income tax purposes, unless a taxpayer elected to include the applicable conversion amount in gross income in 2010, none of the amount from such conversion was includible in income in 2010; half of the gross income is includible in 2011 and half in 2012.

Massachusetts generally follows the provisions of the Code as of January 1, 2005, with certain exceptions. Among the Code sections that G.L. c. 62, section 1(c) includes as exceptions and adopts based on the Code as amended and in effect for the taxable year is I.R.C. § 408A.

For Massachusetts purposes, unless a taxpayer elects for federal purposes to include the applicable conversion amount in gross income in year of conversion, none of the amount from such conversion is includible in Massachusetts gross income in year of conversion; the taxpayer must include the applicable Massachusetts gross income from the conversion ratably over the next two years.

Amounts in traditional IRAs previously subject to Massachusetts personal income tax will not be subject to tax when the IRA is converted to a Roth IRA. For more information, see:
TIR 10-8
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IRA Distributions for Charitable Purposes 

The Pension Protection Act of 2006 (P.L. 109-280) provided for an exclusion from federal gross income for distributions made in tax years 2006 and 2007 from traditional and Roth IRAs to qualified charities that would otherwise be taxable income. Subsequently, the federal exclusion was extended for distributions made in tax years 2008 through 2011.  The federal American Taxpayer Relief Act of 2012 (H.R. 8) extends the exclusion for distributions made in tax years 2012 and 2013.

The exclusion applies to:

  • distributions made on behalf of taxpayers who are at least 70½ on the date of distribution in 2012 or 2013;
  • distributions made up to a maximum of $100,000 per year; and
  • Traditional and Roth IRAs.

The exclusion does not apply to Simplified Employee Pension plans, SIMPLE plans, Keoghs, or any other retirement plan such as an I.R.C. § 401(k), 403(b), defined benefit or contribution plan or profit sharing plan.

Massachusetts adopts the new provision allowing an exclusion from gross income for distributions from traditional and Roth IRAs. For more information, see:
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Examples  


Real Estate Tax Credit for Persons Age 65 and Older (Circuit Breaker)

Certain taxpayers age 65 or older may be eligible to claim a refundable credit on their state income taxes for the real estate taxes paid during the tax year on the residential property they own or rent in Massachusetts that is used as their principal residence. If the credit due the taxpayer exceeds the amount of the total income tax payable for the year by the taxpayer, the excess amount of the credit will be refunded to the taxpayer without interest. For tax year 2012, the maximum credit allowed for both renters and homeowners is $1,000.

To be eligible for the credit for the 2012 tax year: the taxpayer or spouse, if married filing jointly, must be 65 years of age or older at the close of the 2012 tax year; the taxpayer must own or rent residential property in Massachusetts and occupy the property as his or her principal residence; the taxpayer's "total income" cannot exceed $53,000 for a single filer who is not the head of a household, $67,000 for a head of household, or $80,000 for taxpayers filing jointly; and for homeowners, the assessed valuation as of January 1, 2012, before residential exemptions but after abatements, of the homeowner's personal residence cannot exceed $705,000. For more information, see:
TIR 12-8
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Tax Rates

M.G.L. Chapter 62, Section 4, establishes the personal income tax rates to be applied against different classes of Massachusetts taxable income. The tax rate on most classes of income is scheduled to decrease in years where the state achieves revenue growth benchmarks set forth by formula in M.G.L. Chapter 62, Section 4(b).

Accordingly, effective for tax years beginning on or after January 1, 2012, the 5.3 percent tax rate on most classes of taxable income is decreased to 5.25 percent. The tax rate on short-term gains from the sale or exchange of capital assets and on long-term gains from the sale or exchange of collectibles (after a 50 percent deduction) remains at 12 percent. For more information, see:
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Major Federal Tax Law Changes for 2012 That Do Not Pertain to Personal Income Tax in Massachusetts

Below you will find brief descriptions of federal tax law changes for 2012 that do not pertain to personal income tax in Massachusetts. Each topic includes links to further detailed information.

Federal Bonus Depreciation (IRS update only)

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 extends the additional first-year depreciation deduction (“bonus depreciation”) under I.R.C. § 168(k) to property placed in service on or after January 1, 2010 and before January 1, 2013. Under 2002 legislation, Massachusetts decoupled from bonus depreciation allowed under I.R.C. § 168(k), as amended and in effect for the current year. Therefore, Massachusetts does not adopt this additional depreciation.
For more information, see:
TIR 02-11
TIR 03-25


Mortgage Forgiveness (IRS update only)

The Mortgage Forgiveness Debt Relief Act of 2007 (P.L. 110-142) amended I.R.C. §108(a) by adding an exclusion for indebtedness that is discharged before January 1, 2010 and is qualified principal residence indebtedness. The Economic Stabilization Act of 2008 extended this exclusion until January 1, 2013. Massachusetts does not adopt this exclusion or the extension because they were enacted after January 1, 2005.


Transportation Fringe Benefits

Based on IRS's Revenue Procedure/inflation adjustment formula, the Massachusetts exclusion amount for tax year 2012 is $240 per month for employer-provided parking and $125 per month for combined transit pass and commuter highway vehicle transportation benefits. 

The federal exclusion amounts for 2012 are $240 per month for employer-provided parking, and $240 per month for combined transit pass and commuter highway vehicle transportation benefits.  In January, 2013, the federal American Taxpayer Relief Act of 2012 (P.L. 112-240)  amended I.R.C. §132(f), increasing the federal monthly exclusion amount for combined transit pass and commuter highway vehicle transportation benefits to equal the exclusion amount for employer-provided parking benefit for both the 2012 and 2013 tax years.

Massachusetts adopts the federal exclusion under the Internal Revenue Code, as amended and in effect on January 1, 2005. Any federal tax law changes to these exclusions will not be automatically adopted. Massachusetts will continue to follow the Code of January 1, 2005. Massachusetts does, however, adopt the IRS's Revenue Procedure/inflation adjustment formula used in determining annual exclusion amounts. For more information, see:
TIR 12-1
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