On October 4 2023, Massachusetts Governor Maura Healy signed H. 4104 which enacted significant tax reform legislation for both businesses and individuals. Some of the more notable changes are outlined below:
Effective for Tax year 2023
- The income tax rate for short-term capital gains (e.g. gains from the sale of capital assets held for 1 year or less) is reduced from 12% to 8.5. This is retroactive to January 1, 2023.
- The estate tax will only apply to estates larger than $2 million, and it will only apply to the amount of the estate exceeding $2 million effective for the estate of decedents who have died on or after January 1, 2023. Previously, the estate tax applied to the entire value of the estate if the estate was over $1 million not just the excess over $1 million.
- The Senior Circuit breaker tax credit doubles from $1,200 to $2,400
- Rental deduction limit increased from $3,000 to $4,000. Renters can deduct half of their rent costs up to the cap.
Effective for tax year 2024
- A married couple who files a joint federal income tax return must file a joint MA income tax return for that year, effective for tax years beginning on or after January 1, 2024. Because of the recent addition of the 4% surtax on taxpayers with over $1 million in taxable income, many taxpayers maybe considering filing married filing separate in MA to avoid the impact of the surtax.
Effective for tax year 2025
- Massachusetts corporate taxpayers will only use a single sales factor to apportion their income for corporate income tax. Previously businesses also included payroll and property factors in their apportionment.
If you would like to discuss how these changes or any of the other tax changes could impact you or your business please contact the tax professionals at Lee & Crowley.