Tax Alert – House Bill 4104

Business Exit Planning

Massachusetts Governor Maura Healey recently signed House Bill 4104, a historic tax relief package titled, “An Act to improve the Commonwealth’s competitiveness, affordability, and equity.” This tax package encompasses a wide range of relief for families, businesses, seniors, low-income earners, and renters throughout Massachusetts.

Here’s a summary of some of the key changes:

Estate Tax: Estates valued up to $2 million in Massachusetts will be exempt from taxes due to a new $99,600 uniform credit eliminating the so-called “cliff tax”. The increased estate tax threshold means more estates will be exempt from the estate tax, which could allow for more assets to be passed to heirs. This provision is effective retroactively to January 1, 2023.

Millionaire’s Tax: Starting in the 2024 tax year, married taxpayers filing joint returns with the IRS are required to file jointly in Massachusetts. This will prevent married couples who earn over $1 million from filing as “married filing separately” doubling the $1 million exemption and would reduce or eliminate the income subject to the Commonwealth’s 4% surtax.

Child and Family Tax Credit: The dependent tax credit has increased from $180 per dependent child, disabled adult, or senior to $310 for 2023 and to $440 on a permanent basis starting in 2024, thereby helping larger families with more dependents.

Short Term Capital Gains: Reduces the Massachusetts short-term capital gains tax from 12% to 8.5%. The change is retroactive to January 1, 2023.

Business Taxation: Businesses in MA that are subject to tax in multiple states will be required to change their method of apportioning taxable income to a single sales apportionment formula as opposed to the current tax laws that subjects businesses to a three-factor apportionment system. This change should make Massachusetts in line with other states and can provide a more favorable taxing environment for in-state businesses. This change goes into effect January 1, 2025.

Earned Income Tax Credit: This tax break for low to moderate income workers who qualify has increased to 40% of the federal credit starting in 2024 for the 2023 tax year.

Senior Circuit Breaker Tax Credit: The annual Senior Circuit Breaker Tax Credit doubled from $1,200 to $2,400 to assist low-income seniors.

Rental Deductions: Previously, eligible renters in Massachusetts could deduct up to $3,000 of rent paid during the year. Under the new legislation, this amount has increased to $4,000.

Feel free to reach out for further information or clarification.

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