New Amended Return Process
Beginning October 31, 2016, individuals do not need any special form to file an amended return, they will just submit a revised tax return. The Form CA-6 Application for Abatement/Amended Return will no longer be used for this (or any) purpose. For tax years 2016 and after, you’ll find a new “amended return” oval at the top of the form. For earlier tax years, you can write “amended return” at the top of your Form 1 or Form 1-NR/PY.
Filing an amended return will be the appropriate means for most taxpayers to increase previously self-assessed tax, to decrease previously self-assessed tax, to report an increase in self-assessed tax resulting from a federal change, to report a decrease in self-assessed tax resulting from a federal change, and to make amendments that have no net effect on the tax shown on the return (e.g., amendments that would affect a loss carryover). For further information see page 7 of the Form 1 or Form 1-NR/PY Instruction booklet. Also see TIR 16-13 and Requesting an Abatement or Amending Your Tax Return.
- Filing Due Dates
- 2016 Personal Income Tax Rates
- Penalty for Failure to Obtain Health Insurance
- Annual Update of Circuit Breaker Tax Credit
- Employer Provided Parking, Transit Pass, and Commuter Highway Vehicle Benefits Exclusion Amounts
- Change in Standard for Determining Subsequent Community Investment Tax Credit Allocations
- Simplified Rules for Automatic Extensions of Time
- Increase of the Massachusetts Earned Income Tax Credit
- Current Code Provisions Massachusetts Adopts
- Code Provisions Not Adopted by Massachusetts:
Form 1 is due on or before Tuesday, April 18, 2017. Because April 15, 2017 is a Saturday and the observance of Patriot’s Day, a legal holiday in Massachusetts is on Monday, April 17, 2017, Massachusetts returns and payments otherwise due on April 15, 2017 will be treated as timely filed if they are filed on or before Tuesday April 18, 2017.
Effective for tax years beginning on or after January 1, 2016, the tax rate on most classes of taxable income is 5.1% (decreased from 5.15% for tax year 2015). However, the tax rate on shortterm gains from the sale or exchange of capital assets and on long-term gains from the sale or exchange of collectibles (after a 50% deduction) remains at 12%.
Massachusetts requires most adults 18 and over with access to affordable health insurance to obtain it. In 2016, 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 (“Health Connector”). Individuals who are deemed able to afford health insurance but fail to obtain it 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 monthly penalties, which will be imposed through the individual’s personal income tax return, are set out in TIR 16-2 and are based on half of the minimum monthly insurance premium for which an individual would have qualified through the Health Connector.
Schedule HC, Health Care Information, must be completed by all full-year and certain part-year residents age 18 and over to notify the Department of Revenue whether or not they had health insurance for each month of 2016. Taxpayers who did not have coverage for all of 2016, or had a gap in coverage of four or more consecutive months will need to determine if they had access to affordable health insurance (through an employer, the government, or on their own) using worksheets and tables available for this purpose. If it is determined that a taxpayer could have afforded health insurance, the taxpayer has the right to appeal the application of the penalty due to hardship by requesting an appeal to the Connector on the Schedule HC.
For more information about the health care reform law, including the Department’s regulation at 830 CMR 111M.2.1, Health Insurance Individual Mandate; Personal Income Tax Return Requirements, or the Health Connector’s regulation at 956 CMR 6.00, Determining Affordability for the Individual Mandate, see the Health Connector’s website at mahealthconnector.org or the Department’s website at mass.gov/dor.
Taxpayers age 65 or older who own or rent residential property located in Massachusetts are allowed a credit equal to the amount by which their real estate tax payments, or 25% of the rent constituting a real estate tax payment, exceeds 10% of the taxpayer’s total income, not to exceed $1,070. The amount of the credit is subject to limitations based on the taxpayer’s total income and the assessed value of the real estate, which for tax year 2016 must not exceed $720,000.
For purposes of calculating the credit, total income and maximum credit thresholds are adjusted annually. For tax year 2016, an eligible taxpayer’s total income cannot exceed $57,000 in the case of a single filer who is not a head of household filer; $71,000 for a head of household filer; and $86,000 for joint filers. In order to qualify for the credit, a taxpayer must be age 65 or older and must occupy the property as his or her principal residence. See TIR 16-8.
Massachusetts adopts Internal Revenue Code (“Code” or “IRC”) § 132(f) as amended and in effect on January 1, 2005, which excludes from an employee’s gross income (subject to a monthly maximum) employer-provided parking, transit pass, and commuter highway vehicle transportation benefits. For tax year 2016, the Internal Revenue Service has calculated, based on inflation adjustments contained in IRC § 132(f) as set forth in the January 1, 2005 Code, the 2016 monthly exclusion amounts of $255 for employer-provided parking and $130 for combined transit pass and commuter highway vehicle transportation benefits. Massachusetts adopts these 2016 monthly exclusion amounts as they are based on the January 1, 2005 Code. See TIR 15-16.
The standard for determining whether a recipient of a prior credit allocation is eligible for a subsequent community investment tax credit allocation under G.L. c. 62, § 6M(c)(4) has changed. Effective August 10, 2016, a community partner is eligible to receive a subsequent community investment tax credit allocation if the Department of Housing and Community Development determines that the community partner has made satisfactory progress towards utilizing any prior allocation it has received. Prior to this change, a community partner was required to have utilized at least 95% of its prior allocation to be eligible for a subsequent allocation.
Beginning with personal income tax returns due on or after December 5, 2016, all taxpayers filing such returns will be automatically granted a 6-month extension of time to file their tax return as long as at least 80% of the total amount of tax ultimately due on or before the date prescribed for payment of the tax has been paid. Prior to this change, taxpayers were required to submit a formal request electronically or on paper or otherwise meet certain criteria to receive an extension of time to file a personal income tax return. See TIR 16-10.
A Massachusetts refundable earned income credit is available to certain low-income individuals who have earned income. To claim the Massachusetts credit, taxpayers must qualify for and claim the federal earned income credit allowed under I.R.C. § 32, as amended and in effect for the taxable year. Taxpayers may claim the Massachusetts credit even if they do not have a filing requirement. To receive the credit, taxpayers must file a tax return and claim the credit. For tax years beginning on or after January 1, 2016, the Massachusetts refundable credit is increased to 23% of the computed federal credit (up from 15% in previous years). See TIR 15-12.
As a general rule, Massachusetts does not adopt any federal personal income tax law changes incorporated into the Code after January 1, 2005. However, certain specific Massachusetts personal income tax provisions, as set forth in G.L. c. 62 § 1(c), automatically conform to the current Code. Provisions of the Code Massachusetts adopts on a current Code basis are (i) Roth IRAs, (ii) IRAs, (iii) the exclusion for gain on the sale of a principal residence, (iv) trade or business expenses, (v) travel expenses, (vi) meals and entertainment expenses, (vii) the maximum deferral amount of government employees’ deferred compensation plans, (viii) the deduction for health insurance costs of self-employed taxpayers, (ix) medical and dental expenses, (x) annuities, (xi) health savings accounts, (xii) employer-provided health insurance coverage, and (xiii) amounts received by an employee under a health and accident plan. See TIRs 98-8, 02-11, 07-4, and 09-21 for further details.
Qualified Charitable Distribution from an IRA – IRC § 408(d)(8)
Under IRC § 408(d)(8), taxpayers age 701⁄2 or greater are allowed to make tax-free distributions from traditional and Roth IRAs to qualified charities not to exceed $100,000 per tax year. Massachusetts adopts this federal exclusion, as IRC § 408(d)(8) is adopted by Massachusetts on a current Code basis.
IRC § 179 Election to Expense Certain Depreciable Business Assets
Under IRC § 179, a taxpayer may elect to treat the cost of certain types of depreciable business property (i.e., tangible depreciable business assets acquired by purchase for use in the active conduct of a trade or business and certain qualified real property) as an expense rather than a capital expenditure, and deduct it in the year the property is placed in service, instead of depreciating it over several years. The maximum IRC § 179 expensing limitation is $500,000, subject to an overall investment phase-out threshold of $2,000,000. As a trade or business deduction under G.L. c. 62, § 1(c), IRC § 179 is adopted by Massachusetts on a current Code basis.
Code Provisions Not Adopted by Massachusetts:
Federal Bonus Depreciation Deduction - IRC § 168(k)
Massachusetts specifically disallows the bonus depreciation deduction allowed under IRC § 168(k), as amended and in effect for the current taxable year. Therefore, Massachusetts does not adopt the 5 year extension through tax year 2019 of the federal bonus depreciation deduction pursuant to the Consolidated Appropriations Act of 2016 (P.L. 114-113). See TIRs 02-11 and 03-25 for further details.
Domestic Production Activity Deduction - IRC § 199
For federal income tax purposes, under IRC § 199, a business entity that pays wages to employees and conducts qualified production activities is allowed a deduction for domestic production activities. Generally, in the case of a non-corporate taxpayer, the deduction allows a business with qualified production activities to deduct 9% of its U.S. adjusted gross income. Under G.L. c. 62 § 2(d)(1)(O), Massachusetts specifically disallows the domestic production activity deduction allowed under IRC § 199, as amended and in effect for the current taxable year. Therefore, Massachusetts does not adopt the 2 year extension through tax year 2016 of the deduction allowable for income attributable to domestic production activities in Puerto Rico pursuant to the Consolidated Appropriations Act of 2016 (P.L. 114-113). See TIR 05-5.
Qualified Principal Residence Indebtedness Exclusion - IRC § 108(a)
Massachusetts does not adopt the federal exclusion for qualified principal residence indebtedness under IRC § 108(a) set to expire at the end of 2016, nor will Massachusetts adopt any federal extension of the exclusion enacted after the publication of these form instructions, as IRC § 108(a) was enacted after January 1, 2005