Appendix A

Appendix A Recent Law Changes Affecting Tax Expenditures

The following tax expenditures have been revised or created due to recent law changes.

The Personal Income Tax:

The Fiscal Year 2024 (FY24) Budget and “An Act to Improve the Commonwealth’s Competitiveness, Affordability, and Equity” enacted various changes to the personal income tax.

The following personal income tax expenditures have been revised or created due to recent law changes:

Increase to the rental deduction (TE Item 1.411)

The rental deduction is equal to half of the rent paid for a principal residence located in Massachusetts in a taxable year up to a certain amount. For tax years beginning on or after January 1, 2023, the maximum amount of the rental deduction is increased to $4,000 ($2,000 if married filing a separate return).

Expansion of the commuter deduction (TE Item 1.423)

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).

Deduction for employer-provided student loan payment assistance (New TE Item 1.430)

For tax years beginning on or after January 1, 2023, employees may deduct employer payments of principal or interest on a qualified education loan during the taxable year that have not already been excluded from their federal gross income. Employees claiming the deduction may not claim any other deduction, such as for student loan interest, for the same amounts paid by their employer. See TIR 23-5 for more information on the federal exclusion of employer payments of student loans.

Increase to the lead paint removal tax credit (TE Item 1.602)

Effective for tax years beginning on or after January 1, 2023, the maximum amount of the lead paint removal tax credit has been increased to $3,000 for each residential unit in which certain accessible materials containing lead, including paint, were removed, contained, or replaced. In addition, the maximum amount of the credit for residential units in which such materials were partially covered or removed has been increased to $1,000.

Increase in the Massachusetts earned income tax credit – (TE Item 1.605)

Effective for tax years beginning on or after January 1, 2023, the amount of the Massachusetts earned income tax credit (“EITC”) an individual may claim is increased to 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 pro-rated. A taxpayer who is a non-resident for the entire taxable year cannot claim the credit.

Increase to the septic tax credit (TE Item 1.606)

Effective for tax years beginning on or after January 1, 2023, the maximum amount of the septic tax credit taxpayers may claim per taxable year has been increased to $4,000. The maximum total credit amount that can be claimed with respect to a particular project is increased to $18,000. In addition, the percentage of allowable septic system expenditures used to calculate the credit is increased to 60%.

Increase to the low-income housing tax credit cap (TE Item 1.607)

For tax years beginning on or after January 1, 2023, the low-income housing tax credit’s annual cap has been increased to $60,000,000.

Extension of the brownfields tax credit (TE Item 1.608)

The brownfields tax credit, previously scheduled to expire on August 5, 2023, has been extended for five additional years. Under prior law, to qualify for a brownfields tax credit, the taxpayer must have commenced the environmental response action on or before August 5, 2023, and incurred net response and removal costs before January 1, 2024. Under the revisions made by the FY24 Budget, the taxpayer must commence the environmental response action on or before August 5, 2028, and incur net response and removal costs before January 1, 2029.

Increase to the circuit breaker tax credit (TE Item 1.609)

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 up to a certain amount. 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.

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 for a head of household filer, and $103,000 for joint filers. In order to qualify for the credit, a taxpayer must be aged 65 or older and must occupy the property as his or her principal residence. See TIR 23-11 for more information.

Increase to the dairy farm tax credit cap (TE Item 1.614)

For tax years beginning on or after January 1, 2023, the dairy farm tax credit’s annual cap has been increased to $8,000,000.

Increase to the certified housing development tax credit cap (TE Item 1.619)

For the 2023 calendar year, the certified housing development tax credit’s annual cap has been increased to $57,000,000. For tax years beginning on or after January 1, 2024, the annual cap is set at $30,000,000.

Child and family tax credit (New TE Item 1.628)

Starting with tax years beginning on or after January 1, 2023, individuals subject to the personal income tax may claim a refundable, non-transferable child and family tax credit if they maintain a household that includes an individual who is (1) under the age of 13 and who may be claimed as a dependent for purposes of the dependent for exemption as a dependent for federal purposes; (2) a dependent, 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 who is age 65 or over or disabled. For the tax year beginning on or after January 1, 2023, the amount of the credit is equal to $310 for each such individual. The credit will be increased to $440 for each such individual for tax years beginning on or after January 1, 2024.

Other changes:

Reinstatement of the Personal Income Tax Deduction for Charitable Contributions (TE Item 1.415)

For tax years beginning on or after January 1, 2023, a deduction for charitable contributions is available for M.G.L. c. 62 taxpayers. This deduction had been suspended since the 2002 tax year.

Pursuant to M.G.L. c. 62, § 1(c), Massachusetts conforms to certain Internal Revenue Code (“Code”) provisions currently in effect, rather than as of a fixed date. Provisions of the Code that Massachusetts will continue to apply on a current basis are those related 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.

Any changes to those Code sections are automatically adopted in Massachusetts, and any tax expenditure derived from those sections will reflect the impact of any such changes. DOR will continue to review the impact of tax law changes at the federal level and will update future Tax Expenditure Budgets as necessary.

Corporate excise changes:

The Fiscal Year 2024 (FY24) Budget and “An Act to Improve the Commonwealth’s Competitiveness, Affordability, and Equity” enacted various changes to the corporate excise.

The following corporate expenditures have been revised or created due to recent law changes:

Extension of the Brownfields Credit (TE Item 2.608)

Increase to the low-income housing tax credit cap (TE Item 2.609)

For tax years beginning on or after January 1, 2023, the low-income housing tax credit’s annual cap has been increased to $60,000,000.

Increase to the dairy farm tax credit cap (TE Item 2.618)

For tax years beginning on or after January 1, 2023, the dairy farm tax credit’s annual cap has been increased to $8,000,000.

Increase to the certified housing development tax credit cap (TE Item 2.622)