Below you will find brief descriptions of major tax law changes for 2014 pertaining to personal income tax in Massachusetts. Each topic includes links to further detailed information.

Brownfields Credit

The Fiscal Year 2014 Budget extends the Brownfields Credit, previously scheduled to expire on August 5, 2013, for five additional years. Taxpayers subject to the personal income tax or corporate excise under General Laws chapters 62 and 63 and tax-exempt organizations within the meaning of I.R.C. § 501(c) are allowed a transferable Brownfields Credit for incurring eligible costs to remediate a hazardous waste site on property used for business purposes and located within an economically distressed area.

The credit may be either 50% or 25% of the “net response and removal costs” as that term is defined in G.L. c. 21E, § 2, depending upon whether an activity or use limitation has been imposed. To qualify, the taxpayer must “commence and diligently pursue” the relevant environmental response action(s) on or before August 5, 2018.  Also, the net response and removal costs must be incurred prior to January 1, 2019. For more information, see:
TIR 13-15
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Community Investment Credit

Pursuant to St. 2012, c. 238, and codified at G.L. c 62, § 6M and G.L. c. 63, § 38EE, a Community Investment Tax Credit is allowed for tax years beginning on or after January 1, 2014 for qualified investments made on or after January 1, 2014. Qualified investments include certain cash contributions made to a community partner or a community partnership fund. The credit, set to expire December 31, 2019, .is equal to 50% of the total qualified investment made by the taxpayer for the taxable year. Pursuant to the Supplemental Budget, the Community Investment Tax Credit has been made refundable but not transferable. Alternatively, the credit may be carried forward 5 years. If a taxpayer elects to carry forward a credit balance, then the option to claim a credit refund does not apply. For more information, see:
830 CMR 62.6M.1
TIR 13-15
TIR 12-10
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Earned Income Credit

For federal income tax purposes, the American Taxpayer Relief Act (P.L. 112-240) makes permanent or extends through 2017 enhancements to the earned income tax credit. 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 I.R.C. sec. 32. For more information, see:
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Employer Wellness Program Credit

Effective for tax years beginning on or after January 1, 2013, a Massachusetts business that employs 200 or fewer workers may qualify for a tax credit for up to 25% of the cost of implementing a “certified wellness program” for its employees. A taxpayer seeking to claim the credit must apply to the Department of Public Health (DPH) for certification of its wellness program. DPH will approve a dollar amount of credit for a qualifying taxpayer and issue a certificate to be provided in connection with filing a tax return in order to claim the credit. The amount of the credit that may be claimed by a taxpayer cannot exceed $10,000 in any tax year. The credit is set to expire on December 31, 2017.  For more information, see:
105 CMR 216.000, Massachusetts Wellness Tax Credit Incentive
TIR 12-10
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Health Insurance, Penalty for Failure to Purchase - Tax Year 2014

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 2014, 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:
(Working Draft)
TIR 14-3 (updates and replaces TIR 14-1)
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Health Insurance, Massachusetts  Interaction  with New Federal Penalty

Beginning January 1, 2014, the federal Affordable Care Act instituted a federal mandate on individuals to obtain health insurance. For tax years beginning on or after January 1, 2014, if a nonexempt individual fails to obtain health insurance meeting federal standards, the person is liable for a penalty termed the “shared responsibility payment” that must be reported on his or her federal income tax return.

To provide guidance on the interaction of the Massachusetts individual mandate with the federal mandate to obtain health insurance, the Department of Revenue plans to amend its regulation, 830 CMR 111M.2.1: Health Insurance Individual Mandate; Personal Income Tax Return Requirements. In particular, these amendments would create a credit against any Massachusetts health care penalty owed for the amount of any federal health care shared responsibility payment, so as to prevent aggregated federal and state penalties.  For more information, see:
830 CMR 111M.2.1 (Working Draft)
TIR 14-3 (updates and replaces TIR14-1)
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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 2014, the maximum annual aggregate contribution is equal to $3,300 for an individual plan or $6,550 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 2014, the maximum annual aggregate contribution for an individual age 55 or older is equal to $4,300 for an individual plan or $7,550 for a family plan. For more information, see:
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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, 2014, the 5.25 percent tax rate on most classes of taxable income is decreased to 5.20 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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