Governor Maura Healey signed Massachusetts' first major tax cut package in more than twenty years in October 2023, a roughly one billion dollar relief bill that touched nearly every part of the state tax code. The law expanded credits for parents, raised deductions for renters, increased a senior property tax relief credit, lifted the estate tax threshold, and made other changes that collectively delivered direct savings to millions of Bay State households.

Child and Family Tax Credit

The law rewrote the state's Child and Dependent Tax Credit into a new Child and Family Tax Credit that became, at least at the time, the most generous in the country. Under the revised credit, parents and other caretakers claim a set dollar amount for each qualifying dependent, which includes children, disabled adult dependents, and elderly dependents.

The credit rose from one hundred eighty dollars to three hundred ten dollars per dependent for tax year 2023, and to four hundred forty dollars per dependent for tax year 2024. The law also eliminated the previous cap of two dependents, meaning a family could claim the credit for each qualifying dependent in the household. A family with four children could eventually claim seventeen hundred sixty dollars, nearly five times what the same family could have received under the old law.

Earned Income Tax Credit

The state's Earned Income Tax Credit, which supplements federal EITC for lower-income working families, rose from thirty percent of the federal credit to forty percent. For a single parent of two earning less than fifty thousand dollars a year, that change lifted the state credit from about eighteen hundred forty-nine dollars to roughly twenty-four hundred sixty-five dollars. Multiplied across the hundreds of thousands of Massachusetts households that claim EITC, the change delivered a substantial boost to working families.

Renter Deduction

Massachusetts allows renters to deduct half of the rent they pay during the year from their state taxable income, up to a cap. The new law raised that cap from three thousand dollars to four thousand dollars. For renters paying high rents in Greater Boston and other expensive markets, the larger deduction produced modest but real annual savings on state tax bills.

Senior Circuit Breaker Credit

The Senior Circuit Breaker Credit is a refundable state credit for older homeowners and renters whose property taxes or rent take up a disproportionate share of their income. The credit targets seniors aged sixty-five and older whose incomes fall below specified limits, typically eighty thousand dollars for individuals and ninety-six thousand dollars for couples.

The new law doubled the maximum Circuit Breaker Credit from twelve hundred dollars to twenty-four hundred dollars, a significant boost for seniors on fixed incomes. Because the credit is adjusted for inflation each year, the maximum rose further in subsequent years. The change was expected to help roughly one hundred thousand seniors, with particularly strong relief for those whose property taxes had climbed faster than their retirement income.

Estate Tax Relief

Massachusetts had long been one of a small number of states with an estate tax kicking in at relatively modest levels. The prior threshold sat at one million dollars, a figure that had not kept up with decades of real estate appreciation. A retired couple with a long-held suburban home could easily find their estate above the threshold.

The new law raised the estate tax threshold to two million dollars and eliminated the so-called cliff effect by providing a uniform ninety-nine thousand six hundred dollar credit. Previously, an estate that crossed the threshold by even one dollar owed tax on the entire estate, not just the portion above the threshold. Under the new law, tax liability scales more smoothly, removing the incentive for estate planning gymnastics that did little for anyone except lawyers.

Short-Term Capital Gains

Investors selling stocks or other assets held for less than a year in Massachusetts had long paid a twelve percent state tax on the profit, a much higher rate than the state's five percent long-term capital gains tax or its five percent flat rate on most income. The new law reduced the short-term capital gains rate to eight and a half percent. The change brought Massachusetts closer to competitive with other states while still maintaining a distinction between short- and long-term holdings.

Housing Development Incentive Program

The law included increases to the Housing Development Incentive Program, or HDIP, which provides tax credits for creating market-rate housing in gateway cities. By boosting HDIP, the legislature aimed to encourage conversion of underused buildings and new construction in older cities, adding housing supply in markets where demand has outstripped available units.

What It Meant for Homeowners

Homeowners across Massachusetts, particularly older ones, saw meaningful reductions in their state tax bills under the new law. The expanded Senior Circuit Breaker Credit helped homeowners whose property taxes were eating into retirement income. The higher estate tax threshold protected modest family wealth from taxation. And the Child and Family Tax Credit boosted disposable income for working parents, much of which flows into mortgage payments, home improvements, and household expenses.

At the same time, the law did not directly address rising home prices, high property tax assessments in fast-appreciating towns, or the underlying supply shortage that drives those pressures. Housing advocates generally welcomed the relief while arguing that more work remained to address affordability at its source.

Filing Tips

To claim the new credits, Massachusetts residents file their state income tax return with updated forms that reflect the revised credit calculations. The Department of Revenue publishes guidance each tax season, and free tax preparation sites operated through the Volunteer Income Tax Assistance program can help lower-income households claim credits they might otherwise overlook. The Senior Circuit Breaker Credit in particular is a commonly missed credit, so seniors should review eligibility each year and consider filing even if their income otherwise would not require it.

Massachusetts Tax Cuts Help Parents, Renters, Seniors, and More