Author: Municipal Finance Law Bureau
This month's Ask DLS features frequently asked questions about the recently signed tax reform bill (“Act”). Please let us know if you have other areas of interest or send a question to cityandtown@dor.state.ma.us. We would like to hear from you.
What is the tax reform bill?
On October 4, 2023, Governor Healey signed “An Act to Improve the Commonwealth’s competitiveness, affordability and equity” into law. St. 2023, c. 50. The $1 billion package includes an expanded Child and Family Tax Credit, increases to the Rental Deduction, Senior Circuit Breaker Tax Credit, and Housing Development Incentive Program (HDIP), and changes to the Estate Tax and Short-Term Capital Gains. Sections 2 and 3 of the Act are related to property taxes.
What does section 2 of the legislation do?
Section 2 of the Act increases the maximum senior work off abatement program amount from $1,500 to $2,000, pursuant to G.L.
c. 59, §5K. Municipalities who have already accepted this statute do not need to re-accept for the increase to be effective. However, municipalities may need to amend their local bylaws/ordinances if the same contain the lower $1,500 figure and the municipality desires to increase the amount. Any increases may begin in fiscal year 2025. Please see IGR-2021-20 for more information on the senior work off program.
What does section 3 of the legislation do?
Section 3 creates a new local option property tax exemption. Acceptance is by vote of the municipality’s legislative body, subject to charter. G.L. c. 4, § 4. The acceptance vote should explicitly state the fiscal year in which the exemption will commence, the first of which can be fiscal year 2025.
In essence, the new exemption gives a property tax exemption to residential unit owners who rent their units year-round to income qualifying persons at an affordable rate. The affordable housing rate is determined by the city or town but must be in accordance with the United States Department of Housing and Urban Development’s (HUD) guidance and regulations. The year-round occupants must have an annual household income that does not exceed the amount set by the city or town; provided, however, that said income shall not be more than 200 percent of the area median income.
The amount of the exemption will be determined locally but cannot be more than the tax otherwise due on the parcel based on the full and fair assessed value multiplied by the square footage of the qualifying housing units divided by the total square footage of a structure located on the parcel. For example, based on full and fair assessed value, the tax obligation of a three-unit home is $12,000. Each of the three units is 900 square feet. If only one of the units qualifies for exemption, then the property owner would receive an exemption equal to 1/3 (900/2700) of the locally determined amount. As such, in this example, the maximum exemption amount would be
$4,000 for that unit. Otherwise, if property seeking an exemption is assessed by an income approach to value, then fair market rent must be assumed for all units.
This exemption only applies to class one residential units and any rented accessory dwelling units that meet the above criteria are eligible. The unit is not required to be subject to an affordability restriction but may have one.
To be considered for this new exemption, applicants must submit an application annually to the local assessors. The applications must include, but are not limited to, a signed lease covering the entire fiscal year at issue and proof of the occupying person or persons’ household income. The annual application for the exemption must be filed with the assessors no later than the due date of the first actual (not preliminary) tax payment for the fiscal year. DLS will be publishing a standard application form for this exemption. Lastly, a municipality may adopt ordinances or by-laws to implement the provisions of the exemption.
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Editor: Dan Bertrand
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| Date published: | November 2, 2023 |
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| Last updated: | October 9, 2025 |