830 CMR: DEPARTMENT OF REVENUE
830 CMR 62.00: INCOME TAX
830 CMR 62.00 is hereby repealed and replaced with the following:
830 CMR 62.3.1: Rent Deduction
Regulation 830 CMR 62.3.1: Rent Deduction
830 CMR: DEPARTMENT OF REVENUE
Table of Contents
An individual who rents property located in the Commonwealth as his principal residence is entitled to an income tax deduction from Part B adjusted gross income equal to 50 percent of the rent, as hereinafter defined, paid to the landlord. For taxable years beginning on or after January 1, 2001, the maximum deduction shall not exceed $3,000. [M.G.L. c. 62, § 3(B)(a)(9) as amended by St. 1999, c. 127.]
(2) Location of Principal Residence
A taxpayer must be a resident of Massachusetts for his or her principal residence to be in Massachusetts. If a taxpayer is resident in Massachusetts and has only one place of residence, that place of residence is the taxpayer’s principal residence. If a taxpayer is resident in Massachusetts and has more than one place of residence, the determination of which place of residence is the taxpayer’s principal residence depends upon all the facts and circumstances in the case, including the number of days spent at each place of residence and the good faith representations of the taxpayer.
Example 1: A, a Massachusetts resident, owns a house in Springfield in which he lives most of the year and also rents a cottage on Cape Cod which he uses in the summer months. The Springfield house is his principal residence; the summer cottage is not. A may not deduct the rent on the summer cottage.
Example 2: B, a New Hampshire resident, owns a house in New Hampshire and also rents an apartment in Boston. His New Hampshire house is his principal residence; the Boston apartment is not. B may not deduct the rent on the Boston apartment.
Example 3: C, a Massachusetts resident, rents an apartment in Boston in which he lives most of the time and also rents a cottage in Maine. The Boston apartment is C's principal residence; the Maine cottage is not. C may deduct the rent on the Boston apartment.
Example 4: D, a University of Massachusetts undergraduate student, rents an apartment in Amherst during the school year and resides with her parents in the family home in Newton when she is not at college. Her home in Newton is her principal residence; the apartment rent is not deductible.
(3) What Constitutes Rent
For purposes of this regulation "rent" means the amount paid to a landlord by a tenant for the rental or lease of premises which are occupied as a principal residence located in Massachusetts.
Rent may include the rental of a mobile home or of a mobile home site. Payments by a tenant-stockholder of a cooperative housing corporation to the corporation and payments by an owner of a condominium unit to the condominium association are not rent. Consideration paid for the occupancy of a "hotel", "lodging house" or "motel", as defined in M.G.L. c. 64G, § 1, or similar occupancies, is not rent unless and until such premises are occupied under a rental agreement, written or oral, creating a landlord-tenant relationship.
In determining the amount of the deduction, rent includes the amount paid for heat, hot water, gas, electricity, furniture or parking, if the landlord makes no separate charge for these items. But if charges for these items are separately stated at the time of rental, in the rental agreement or otherwise, such charges do not constitute rent for purposes of the rental deduction.
Example: Under the terms of E's lease the rental price of his unit is $300 per month, which includes the cost of heat and hot water. The lease provides for an additional charge of $25 per month for a parking space. E pays for his own electricity. E's rental deduction for each month of occupancy for which rent is paid is $150 (50% of $300 rent).
Where a tenant provides services to a landlord and in consideration for such services receives a reduction in rent, rent is the actual amount of money paid by the tenant to the landlord; rent does not include payments in kind.
Example: M, a tenant in N's apartment building, tends the garden surrounding the building. In consideration for this service M is charged only $250 per month for the right to occupy his apartment unit; other tenants, occupying similar units, are charged $300 per month. M's rental deduction for each month of occupancy for which rent is paid is $125 (50% of $250).
Rent does not include amounts paid as a security deposit or amounts paid for the last month's rent upon entering into a lease, unless and until applied to unpaid rent.
(4) Persons Entitled to Deduction
A taxpayer whose principal residence is in Massachusetts and who pays rent for such premises is eligible for the rental deduction. If two or more individuals jointly rent a unit, each individual who occupies the unit as his principal residence is entitled to a deduction based on the amount of rent he paid.
Example 1: F, a young artist, occupies as her principal residence an apartment in Cambridge, which is leased for her by her aunt who resides in Boston. The rent is paid by the aunt. F is not entitled to a deduction since she does not pay the rent; the aunt is not entitled to the deduction because the apartment is not her residence.
Example 2: G, a teacher, and H, a salesman, rent an apartment in Boston for $300 a month; each pays $150. The apartment is G's only residence; H also owns a house in Pittsfield in which he lives when not traveling. G's rental deduction for each month of occupancy for which rent is paid is $75 (50% of $150). H is not entitled to a deduction since the Boston apartment is not his principal residence.
(5) Prepayment and Late Payment of Rent
The rental deduction may only be taken for the taxable year in which the rent was paid (but see Subsection (3) for special rules as to amounts paid for the last month's rent or as a security deposit); it applies to rent paid after December 31, 1980 for rental periods ending after that date.
Example 1: I, a tenant whose rental period runs from the first to the last day of the month, pays his January, 1982 rent is December, 1981. I will take the deduction for the January, 1982 rental period on his 1981 return, the return for the year in which the payment was made.
Example 2: J pays his October and November, 1981 rent in February, 1982; he may take the deduction for this payment on his 1982 return, the return for the year in which the payment was made.
Example 3: K, a tenant whose rental period runs from the 15th day of one month to the 14 TH day of the following month paid rent for the December 15, 1980 to January 14, 1981 rental period on December 15, 1980. K is not entitled to a deduction for this payment since the rental deduction applies to rent paid after December 31, 1980.
Every taxpayer claiming the rental deduction must provide the information required by the appropriate schedule of the Massachusetts Income Tax Return (Form 1) and must retain adequate records to substantiate the deduction.
(7) Effective Date
The residential rental deduction is effective for taxable years ending after December 31, 1980.
830 CMR 62.3.1: Rent Deduction (old number 62.40)
Date of Promulgation: 12/24/81
Amended: 12/16/16 - Section (2)