2023 Personal Income and Corporate Excise Tax Law Changes

Here you will find descriptions of major Massachusetts Personal Income (Chapter 62) and Corporate Excise (Chapter 63) tax law changes for tax year 2023.

Posted: February 6, 2024

Table of Contents

Tax Year 2023 Personal Income (Chapter 62) Changes

For more up-to-date and detailed information and to view all of the public written statements ref­erenced, go to the 2023 Form 1 and Form 1-NR/PY Instructions.

Filing Due Dates

Form 1 is due on or before April 17, 2024. April 15, 2024, when returns and payments would nor­mally be due, is Pa­triots' Day, a legal holiday in the Commonwealth, and April 16, 2024 is Emancipation Day, a legal holiday in Washington, D.C. As a result, returns, payments made with returns, and estimated payments otherwise due on April 15, 2024, will be treated as timely if they are filed and/or paid on or before April 17, 2024.

2023 Personal Income Tax Rates

The tax rate on most classes of taxable income is 5%. The tax rate on long-term gains from the sale or exchange of collectibles is 12% (subject to a 50% deduction). 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 8.5%.

4% Surtax on Taxable Income Over $1 Million

For tax years beginning on or after January 1, 2023, MGL ch 62 taxpayers must pay an additional 4% (“4% surtax”) on taxable income over a certain threshold. In 2023, this threshold is $1,000,000. The threshold is subject to an annual inflation adjustment. See Technical Information Release (TIR) 23-12 and the 4% Surtax FAQ for more information. 

Penalty for Failure to Obtain Health Insurance

Massachusetts requires most adults 18 and over with access to affordable health insurance to ob­tain it. In 2023, 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 generally subject to penalties in Massachusetts for each month of noncompliance in the tax year. The monthly pen­alties for 2023, which will be imposed through the individ­ual’s personal income tax return, are set out in TIR 22-17 and are based on the monthly insurance premium for which an indi­vidual would have qualified through the Health Connector.

Annual Update of 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. The credit cannot exceed a certain maximum amount that is determined by multiplying a statutory base amount by a cost-of-living adjustment for the calendar year in which the taxable year begins. 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 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 2023 must not exceed $1,025,000. For purposes of calculating the credit, total income and maximum credit thresholds are adjusted annually for inflation. For tax year 2023, an eligible taxpayer’s total income cannot exceed $69,000 in the case of a single filer who is not a head of household filer; $86,000 in the case of a head of household filer; and $103,000 in the case of a joint filer. To qualify for the credit, a taxpayer must be age 65 or older and must occupy the property as his or her principal residence.

Employer-Provided Parking, Transit Pass, and Commuter Highway Vehicle Benefits Exclusion Amounts

Massachusetts conforms to Internal Revenue Code (“IRC”) § 132(f) as amended and in effect on January 1, 2022. IRC § 132(f) excludes from an employee’s gross income (subject to a monthly maximum adjusted annually for inflation) employ­er-provided parking, transit pass, and commuter highway vehicle transportation benefits. The IRS has determined the 2023 monthly exclusion amounts to be $300 for employer-provided park­ing and $300 for combined transit pass and com­muter highway vehicle transportation benefits See TIR 22-15 for more information.

Reinstatement of the Personal Income Tax Deduction for Charitable Contributions

For tax years begin­ning on or after January 1, 2023, a deduction for charitable contributions is available for MGL ch 62 taxpayers. This deduction had been suspended since the 2002 tax year See Schedule Y instructions for more details.

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. The rental deduction cannot exceed a maximum amount. For tax years beginning on or after January 1, 2023, the maximum amount of the rental deduction is $4,000 ($2,000 if married filing a sepa­rate return). Previously, the maximum amount of the rental deduction was $3,000 ($1,500 if married filing a sepa­rate return).  

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). Previously, the deduction was available only for tolls paid for through a Fast Lane account or for weekly or monthly MBTA transit commuter passes for transit, bus, commuter rail, or commuter boat.

Deduction for Employer-provided Student Loan Payment Assistance

For tax years beginning on or after January 1, 2023, employees may deduct the amount of employer-provided “student loan payment assistance” received during the taxable year that has not already been excluded from their gross income under IRC § 127. Employer-provided “student loan payment assistance” is an employer’s payment of an employee’s principal or interest on a qualified education loan, as defined in IRC § 221. Up to $5,250 of these employer payments made in a calendar year beginning before January 1, 2026 are excluded from federal and, therefore, Massachusetts gross income. See TIR 23-5 for more information. As a result, if an employer made payments on an employee’s principal or interest on a qualified education loan during the taxable year, the employee may deduct the amount of such “student loan payment assistance” that exceeds $5,250. Employees may not claim any other deduction, such as for student loan interest, for employer-provided “student loan payment assistance.”

Wind Power Incentive Jobs Credit

For tax years beginning on or after January 1, 2023, and until tax years ending on or before December 31, 2032, a business subject to tax under MGL ch 62 may, to the extent authorized by the offshore wind tax incentive program established in MGL ch 23J, § 8A(d), be allowed a refundable credit in an amount determined by the Mas­sachusetts Clean Energy Technology Center, in consultation with the Department of Revenue. A business taking this credit must commit to the creation of a minimum of 50 net new perma­nent full-time employees in Massachusetts. See TIR 23-6 and MGL ch 62, § 6(bb) for additional information.

Wind Power Incentive Investment Credit

For tax years beginning on or after January 1, 2023, and until tax years ending on or before December 31, 2032, a business subject to tax under MGL ch 62 may, to the extent authorized by the offshore wind tax incentive program established in MGL ch 23J, § 8A(d), be allowed a refundable credit in an amount, as determined by the Mas­sachusetts Clean Energy Technology Center, of up to 50 percent of its total capital investment in an offshore wind facility. See TIR 23-6 and MGL ch 62, § 6(cc) for additional information.

National Guard Hiring Tax Credit

For tax years beginning on or after January 1, 2023, a business subject to tax under MGL ch 62 that employs not more than 100 employees may be allowed a credit equal to $2,000 for each mem­ber of the Massachusetts National Guard hired by the business after July 1, 2022. See TIR 23-6 and MGL ch 62, § 6(aa)for additional information.

Disability Hire Tax Credit

For tax years beginning on or after January 1, 2023, businesses subject to tax under MGL ch 62 that hire employees after July 1, 2021 with a disability who live and work in Massachusetts may be eligible for a credit. The credit is equal to the lesser of $5,000 or 30% of the wages paid to a qualified employee in the first year of em­ployment, and the lesser of $2,000 or 30% of the wages paid to a qualified employee in each subsequent year of employment. For additional information, see 830 CMR 63.38JJ.1: Disability Employment Tax Credit.

Child and Family Tax Credit

Starting with tax years beginning on or after January 1, 2023, individuals subject to tax under MGL ch 62 may claim a refundable, non-transferable child and family tax credit (“CFTC”) if they maintain a household as provided under IRC § 21. The household must include an individual who is (1) under the age of 13 and who qualifies for exemption as a dependent under IRC § 151; (2) a qualifying individual pursuant to IRC § 21, which includes a dependent, as defined in IRC § 152, 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 under IRC § 152 who is age 65 or over or disabled. For the tax year beginning on or after January 1, 2023, the amount of the CFTC is equal to $310 for each such individual. The CFTC will be increased to $440 for each such individual beginning with tax years beginning on or after January 1, 2024. The CFTC replaces the Dependent Care Tax Credit and the Household Dependent Tax Credit, which were repealed for tax years beginning on or after January 1, 2023.

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 an individual may claim is 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 multiplied by a fraction, the numerator of which is the number of days in the taxable year the taxpayer resided in the Commonwealth and the denominator of which is the total number of days in the taxable year. A taxpayer who is a non-resident for the entire taxable year cannot claim the credit.

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 increased from $1,500 for each residential unit in which lead paint was deleaded to $3,000. In addition, the maximum amount of the credit for residential units in which lead paint was partially covered or removed has been increased from $500 to $1,000.

Increase to the Septic Credit

Effective for tax years beginning on or after Jan­uary 1, 2023, the maximum amount of the Sep­tic Credit taxpayers may claim per taxable year has been increased from $1,500 to $4,000. Ex­cess amounts may be claimed in the subsequent five tax years. The maximum total credit amount that can be claimed with respect to a particular project is increased from $6,000 to $18,000. In addition, the percentage of allowable septic sys­tem expenditures used to calculate the credit in­creased from 40% to 60%. If you claimed a Septic Credit before January 1, 2023, and will claim ex­cess amounts in the 2023 and later tax years, the amount of the credit continues to be governed by the prior limitations: the maximum annual credit amount is $1,500; the maximum total credit amount is $6,000; and the percentage of allow­able septic system expenditures used to calculate the credit is 40%.

Extension of Brownfields Tax Credit

The brownfields tax credit, previously scheduled to expire on August 5, 2023, has been extended for five additional years. To qualify for a brownfields tax credit, a taxpayer must commence the environmental response action on or before August 5, 2028, and incur net response and removal costs before January 1, 2029. See TIR 23-12 for more information.

Conformity to the Internal Revenue Code (IRC)

As a general rule, Massachusetts does not conform to any personal income tax law changes to the IRC made after January 1, 2022. See TIR 23-5 for more information. However, certain specific Massachusetts personal income tax provisions, as set forth in MGL ch 62, § 1(c), automatically conform to the IRC currently in ef­fect. The provisions of the IRC that Massachu­setts conforms to on a current basis include those provisions relating to:

  • Roth IRAs;
  • IRAs;
  • The exclusion for gain on the sale of a principal residence;
  • Trade or business expenses;
  • Travel expenses;
  • Meals and entertainment expenses;
  • The maximum deferral amount of government employees’ deferred compensation plans;
  • The deduction for health insurance costs of self-employed taxpayers;
  • Medical and dental expenses;
  • Annuities;
  • Health savings accounts;
  • Employer-provided health insurance coverage;
  • Amounts received by an employee under a health and accident plan; and
  • Contributions to qualified tuition programs.

Tax Year 2023 Corporate Excise (Chapter 63) Changes

For more up-to-date and detailed information and to view all of the public written statements referenced, go to the 2023 Form 335 Instructions.

Filing Due Dates

Massachusetts General Laws (MGL) ch 62C, §§ 11 and 12 require C corporations to file their tax returns on or before the 15th day of the fourth month following the close of each taxable year. The filing due date for S corporation tax returns is the 15th day of the third month following the close of each taxable year. For more information, see Technical Information Release (TIR) 17-5. For calendar year filers, April 15, 2024, when 2023 returns and payments would normally be due, is Patriots’ Day, a legal holiday in the Commonwealth, and April 16, 2024 is Emancipation Day, a legal day in Washington D.C. As a result, returns, payments made with returns, and estimated payments otherwise due on April 15, 2024, will be treated as timely if they are filed and/or paid on or before April 17, 2024.

Wind Power Incentive Jobs Credit

For tax years beginning on or after January 1, 2023, and until tax years ending on or before December 31, 2032, a business subject to tax under MGL ch 63 may, to the extent authorized by the offshore wind tax incentive program established in MGL ch 23J, § 8A(d), be allowed a refundable credit in an amount determined by the Mas­sachusetts Clean Energy Technology Center, in consultation with the Department of Revenue. A business taking this credit must commit to the creation of a minimum of 50 net new perma­nent full-time employees in Massachusetts. See TIR 23-6 and MGL ch 63, § 38LL for additional information.

Wind Power Incentive Investment Credit

For tax years beginning on or after January 1, 2023, and until tax years ending on or before December 31, 2032, a business subject to tax under MGL ch 63 may, to the extent authorized by the offshore wind tax incentive program established in MGL ch 23J, § 8A(d), be allowed a refundable credit in an amount, as determined by the Mas­sachusetts Clean Energy Technology Center, of up to 50 percent of its total capital investment in an offshore wind facility. See TIR 23-6 and MGL ch 63, § 38MM for additional information.

National Guard Hiring Tax Credit

For tax years beginning on or after January 1, 2023, a business subject to tax under MGL ch 63 that employs not more than 100 employees may be allowed a credit equal to $2,000 for each mem­ber of the Massachusetts National Guard hired by the business after July 1, 2022. The credit cannot reduce a business’s corporate excise liability below the minimum corporate excise amount. See TIR 23-6 and MGL ch 63, § 38KK for additional information.

Disability Hire Tax Credit

For tax years beginning on or after January 1, 2023, businesses subject to tax under MGL ch 63 that hire employees with a disability who live and work in Massachusetts may be eligible for a credit. The credit is equal to the lesser of $5,000 or 30% of the wages paid to a qualified employee in the first year of employment, and the lesser of $2,000 or 30% of the wages paid to a qual­ified employee in each subsequent year of em­ployment. The credit cannot reduce a business’s corporate excise liability below the minimum corporate excise amount. For additional information, see 830 CMR 63.38JJ.1: Disability Employment Tax Credit.

Extension of Brownfields Tax Credit

The brownfields tax credit, previously scheduled to expire on August 5, 2023, has been extended for five additional years. To qualify for a brownfields tax credit, a taxpayer must commence the environmental response action on or before August 5, 2028, and incur net response and removal costs before January 1, 2029 See TIR 23-12 for more information.

Federal Conformity

Massachusetts generally conforms to the IRC as currently in effect for Massachusetts corporate and financial institution excise purposes. For more up-to-date and detailed information on tax changes and federal conformity, visit DOR’s website at www.mass.gov/dor.

Filing Season Updates & Video

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This year’s Filing Season video and Resources (PDF) have you covered. Learn about new tax relief, the short-term capital gains tax rate change, the 4% surtax, and more.

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Tax Year 2023 Filing Season Update - Cheryl Brown is located at the upper right hand corner

 

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