Below you will find brief descriptions of major tax law changes for 2013 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 2013 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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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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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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Extension Relating to Taxpayers Affected by the Boston Marathon Explosions

The Massachusetts Department of Revenue will grant automatic extensions of time until July 15, 2013 for certain tax filings and payments otherwise required to be made by certain nonresident individual and business taxpayers and other affected taxpayers, on April 16, 2013.  

“Affected taxpayers” are all individual taxpayers living in Suffolk County and all other Massachusetts personal income tax filers and business and corporate taxpayers whose income or corporate excise filings and payments were adversely impacted by the explosions on April 15, 2013.  Taxpayers whose filings and payments were adversely impacted by the explosions may include those whose tax preparers or availability of needed records were directly impacted by the explosions.  For more information, see:
TIR 13-7
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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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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 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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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  

Lottery or Wagering Winnings, Withholding

Under An Act Establishing Expanded Gaming in the Commonwealth, effective November 22, 2011, payors of Massachusetts lottery or wagering winnings of $600 or greater are required to deduct and withhold Massachusetts personal income tax in an amount equal to five percent of payments made to Massachusetts residents  or nonresidents if the winnings are subject to tax under chapter 62, and the payments are subject to withholding under rules described in § 3402 of the Code, but modified for Massachusetts withholding purposes as follows:

  • Payments of winnings of $600 or greater are subject to Massachusetts withholding notwithstanding that higher dollar thresholds for federal withholding are provided in § 3402 of the Code.
  • Payments of winnings of $600 or greater from slot machines, keno, and bingo played at licensed casinos are subject to Massachusetts withholding notwithstanding the exemption that would apply from federal withholding in § 3402 of the Code.

Withholding exemptions have been removed for winnings from: horse and dog racing; winnings from slot machines, Keno and Bingo. For more information see:
TIR 13-4
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Major Federal Tax Law Changes for 2013 That Do Not Pertain to Personal Income Tax in Massachusetts

Below you will find brief descriptions of federal tax law changes for 2013 that do not pertain to personal income tax in Massachusetts. Each topic includes links to further detailed information.

Federal Bonus Depreciation

For federal income tax purposes, under I.R.C. § 168(k), bonus depreciation applies to eligible property acquired after December 31, 2007 and placed in service before January 1, 2013. The bonus depreciation rate for property placed in service during this period is generally 50%. 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 2013 is $245 per month for employer-provided parking and $125 per month for employer-provided combined transit pass and commuter highway vehicle transportation benefits, including transit pass and employer-provided vanpool benefits that are a reduction in salary.

The federal exclusion amounts for 2013 are $245 per month for qualified parking, and $245 per month for employer-provided combined transit pass and commuter highway vehicle transportation benefits.  In January, 2013, a federal Act amended I.R.C. §132(f), increasing the federal monthly exclusion amount for the transit pass and commuter highway vehicle transportation benefits to equal the exclusion amount for the employer-provided parking benefit for both the 2012 and 2013 tax years. 

Massachusetts follows the January 1, 2005 Code and does not adopt the increased exclusion allowed by the amendment to I.R.C. §132(f), increasing the federal monthly exclusion amount for employer provided transit pass and commuter highway vehicle transportation benefits. Massachusetts does, however, adopt the IRS's Revenue Procedure/inflation adjustment formula used in determining annual exclusion amounts. For more information, see:
TIR 13-2
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