2023 Massachusetts Tax Cuts Legislation

This page covers tax cuts included in 2023 legislation.

Posted: January 5, 2024

Overview

In October 2023, “An Act to Improve the Commonwealth’s Competitiveness, Affordability, and Equity,” St. 2023, c. 50, was passed to provide various tax changes for personal income and corporate excise taxpayers. This web page provides an overview of these changes. Working Draft TIR: Provisions in the 2023 Tax Relief Legislation will provide additional guidance. 

Changes Affecting Only Personal Income Taxpayers

Decrease of the Tax Rate Applicable to Short-term Capital Gains

Effective for tax years beginning on or after Jan­uary 1, 2023, the tax rate on short-term gains from the sale or exchange of capital assets is decreased from 12% to 8.5%. Short-term gains are reported on Schedule B.

Increase to the Circuit Breaker Tax Credit

Taxpayers aged 65 or older who own or rent residential property located in Massachusetts are allowed a credit equal to the amount by which their total real estate tax payments, or 25% of their rent in the case of a renter, exceeds 10% of the taxpayer’s total income up to a certain amount. Effective for tax years beginning on or after January 1, 2023, the statutory base amount has been doubled, resulting in an increase of the maximum credit to $2,590. The circuit breaker tax credit is claimed on Schedule CB. 

Increase to the Rental Deduction

The rental deduction is equal to half of the rent paid for a principal residence located in Massachusetts in a taxable year up to a certain amount. For tax years beginning on or after January 1, 2023, the maximum amount of the rental deduction is increased from $3,000 to $4,000 (and from $1,500 to $2,000 for individuals who are married filing a sepa­rate return). The rental deduction is reported on Form 1 and Form 1-NR/PY.

Expansion of the Commuter Deduction

For tax years beginning on or after January 1, 2023, the commuter deduction has been expanded to include expenses incurred for all Massachusetts Bay Transit Authority (“MBTA”) fares, Massachusetts regional transit authority fares, fares for any commuter boat owned, operated, or contracted by a municipality, public or quasi-public entity, agency, or authority, bikeshare memberships, and the cost of bicycles purchased for commuting (including electric bicycles and bicycle improvements, repairs, and storage). The commuter deduction is reported on Schedule Y.

Deduction for Employer-provided Student Loan Payment Assistance

For tax years beginning on or after January 1, 2023, employees may deduct employer payments of principal or interest on a qualified education loan during the taxable year that has not already been excluded from their federal gross income. Employees claiming the deduction may not claim any other deduction, such as for student loan interest, for the same amounts paid by their employer. The deduction for employer-provided student loan payment assistance is reported on Schedule Y. See TIR 23-5 for more information on the federal exclusion of employer payments of student loans. 

Child and Family Tax Credit

Starting with tax years beginning on or after January 1, 2023, individuals subject to the income tax may claim a refundable, non-transferable child and family tax credit if they maintain a household that includes an individual who is (1) under the age of 13 and who qualifies for exemption as a dependent for federal purposes; (2) a dependent, or the taxpayer’s spouse, who is physically or mentally incapable of taking care of himself or herself and principally lives with the taxpayer; or (3) a dependent who is age 65 or over or disabled. For the tax year beginning on or after January 1, 2023, the amount of the credit is equal to $310 for each such individual, with no cap on the number of individuals for which the credit may be claimed. The credit will be increased to $440 for each such individual for tax years beginning on or after January 1, 2024. The child and family tax credit is claimed on the Form 1 and Form 1-NR/PY.

Increase in the Massachusetts Earned Income Tax Credit

Effective for tax years beginning on or after January 1, 2023, the amount of the Massachusetts earned income tax credit (“EITC”) an individual may claim is increased from 30% to 40% of the computed federal credit. The credit cannot be claimed by married taxpayers that file separate Massachusetts personal income tax returns. With respect to a taxpayer who is a non-resident for part of the taxable year, the credit must be pro-rated. A taxpayer who is a non-resident for the entire taxable year cannot claim the credit. The EITC is claimed on the Form 1 and Form 1-NR/PY.

Increase to the Lead Paint Tax Credit

Effective for tax years beginning on or after January 1, 2023, the maximum amount of the lead paint tax credit has been doubled to $3,000 for each residential unit in which lead paint was deleaded. In addition, the maximum amount of the credit for residential units in which lead paint was partially covered or removed has been doubled to $1,000. The lead paint tax credit is claimed on Schedule LP.

Increase to the Septic Tax Credit

Effective for tax years beginning on or after January 1, 2023, the maximum amount of the septic tax credit taxpayers may claim per taxable year has been increased from $1,500 to $4,000. The maximum total credit amount that can be claimed with respect to a particular project is tripled to $18,000. In addition, the percentage of allowable septic system expenditures used to calculate the credit is increased from 40% to 60%. The septic tax credit is claimed on Schedule SC.

Changes to Massachusetts Joint Filing Requirements

Starting for tax years beginning on or after January 1, 2024, married couples must file a joint personal income tax return for any year in which they file a joint federal income tax return. 

Changes Affecting Both Personal Income & Corporate Excise Taxpayers

Increase to the Dairy Farm Tax Credit Cap

For tax years beginning on or after January 1, 2023, the dairy farm tax credit’s annual cap has been increased from $6,000,000 to $8,000,000.  The dairy farm tax credit is claimed on Schedule CMS.

Increase to the Certified Housing Development Tax Credit Cap

For the 2023 calendar year, the certified housing development tax credit’s annual cap has been increased from $10,000,000 to $57,000,000. For tax years beginning on or after January 1, 2024, the annual cap is set at $30,000,000.  The certified housing development tax credit is claimed on Schedule CMS.  

Increase to the Low-income Housing Tax Credit Cap

For tax years beginning on or after January 1, 2023, the low-income housing tax credit’s annual cap for has been increased from $40,000,000 to $60,000,000.  The low-income housing tax credit is claimed on Schedule CMS.

Changes to the Apprenticeship Tax Credit

For tax years beginning on or after January 1, 2023, the Secretary of the Executive Office of Labor and Workforce Development is authorized to expand the list of qualifying occupations an apprentice may be working in for an employer to be eligible for a credit.

Changes Affecting Only Corporate Excise Taxpayers

Single sales factor apportionment

Starting January 1, 2025, all financial institutions and business corporations doing business in multiple states will apportion their income to Massachusetts using only the sales factor, instead of based on their share of sales, payroll, and property located in Massachusetts as required under current law. These financial institutions and business corporations will apportion their income to Massachusetts using Schedule F.

Changes Affecting the Estate Tax

The new law amended the estate tax by providing a credit of up to $99,600, thereby eliminating the tax for estates valued at $2 million or less and reducing the tax for estates valued at more than $2 million, whereas the estate tax previously applied to estates valued at more than $1 million and offered no credit for estates subject to the tax. The estate tax is reported on Form M-706. 

For more information about these recent changes to the estate tax, please see DOR’s webpage, FAQs: New Estate Tax Changes.

Changes Affecting the Cider Excise

For tax years beginning on or after January 1, 2023, the maximum alcohol content eligible for the cider tax rate of 3 cents per wine gallon has been changed from 6% alcohol by weight to 8.5% alcohol by volume. The cider excise is reported on Form AB-1.