This past summer while everyone was celebrating the Fourth of July, Congress passed and the President signed into Law legislation dubbed “the One Big Beautiful Bill”. This legislation included numerous campaign promises and extensions to various tax provisions from the Tax Cuts and Jobs Act that were set to expire at the end of 2025.
Massachusetts has fixed date conformity which means it follows the Internal Revenue code as of January 1, 2024 and does not automatically adopt these federal changes. In order to provide clarity for taxpayers and practitioners alike, the DOR issued a working draft this past fall to provide clarification on the impact these provisions have on Massachusetts personal and corporate income taxes. The following is a summary of certain tax provisions and is not meant to be all encompassing. Please refer to the following link to read the full draft. Working Draft TIR: Massachusetts Conformity to Certain Provisions in Public Law No. 119-21 | Mass.gov
Individual tax provisions
As Part of the One Big Beautiful Bill, taxpayers in certain qualified professions with adjusted gross income below $150,000 or $300,000 if married filing jointly get a deduction up to $12,500 or $25,000 if married filing jointly for the amount of tip income included in their taxable income. Massachusetts does not adopt this provision
For tax years 2025 through 2028, individuals who receive qualified overtime compensation may deduct the pay that exceeds their regular rate of pay reported on a Form w-2. The deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filer). Massachusetts does not adopt this provisin
Starting in 2026, gambling losses can only be used to offset 90% of gambling winning. This is a change from the current law which allows taxpayers to deduct losses up to 100% of gambling winnings. Massachusetts has adopted this provision.
For tax years 2025 and later, taxpayers with adjusted gross income below $100,000 or $200,000 if married filing jointly can exclude up to $10,00 of car loan interest on eligible vehicles. Eligible vehicles are new , not previously owned, vehicles where final assembly occurred in the United States and the loan must have been used to purchase the vehicle, not to refinance an existing loan. Massachusetts does not adopt this provision.
eligible expenses for purposes of 529 plans, allowing taxpayers to now use 529 funds to pay expenses related to online educational material, tutoring, certain testing fees and certain education therapies for students with disabilities. For 2025 taxpayers may use up to $10,000 of tax exempt distributions to cover the cost of k-12 education. Starting in 2026 this amount increases to $20,000. Massachusetts has adopted this provision.
Business tax provisions
Starting in 2026 businesses can no longer deduct the cost of fringe benefit meals provided to employees. Massachusetts has conformed to this provision.
In addition to bringing bonus depreciation back up from 40% to 100% of the cost of an asset, taxpayers can now elect to fully depreciate qualified production property in the year placed in service. Qualified production property includes nonresidential real property or tangible personal property used in manufacturing, production or refining tangible personal property. Massachusetts does not allow bonus depreciation, but the working draft states Massachusetts will conform to the depreciation allowed for qualified production property.
The Tax Cuts and Jobs Act required taxpayers to capitalize and amortize sec 174 R&D costs incurred starting after January 1, 2022. Domestic R&D was required to be amortized over 60 months and foreign R&D was amortized over 180 months. The OBBBA allows taxpayers to deduct domestic R&D but continue to capitalize and amortize Foreign R&D. The OBBBA also allows eligible taxpayers to make an election to go back and amend their 2022 – 2024 tax returns to deduct domestic R&D. Massachusetts adopts the immediate expensing of R&D on a go forward basis starting January 1, 2025 but does not allow taxpayers to elect to deduct domestic R&D incurred between 1/1/2022 and 12/31/2024.
This is not an all-inclusive list of the various tax provisions from the OBBBA and Massachusetts treatment of such provisions. Should you have any questions or wish to ssee how these provisions may impact your tax filings please contact us.
