The House will take up a major tax relief package this week. Here is a quick overview.
ESTATE TAX REFORM •Current law: The estate tax in kicks in on any estate valued at $1 million and above. There is a “cliff” effect, whereas if the estate is over by even 1 cent, the entire amount in the estate is placed into the whole estate tax owed. •Policy Change: Increases threshold to $2 million. Eliminates the “cliff” effect, no longer taxing the entire estate, just the amount over the new threshold.
SENIOR CIRCUIT BREAKER Current Law: A taxpayer who is 65 years or older, not dependent of another taxpayer and occupies the property as their primary residence is allowed a credit equal to the amount by which the real estate tax payment or the rent constituting real estate tax payment exceeds 10% of the taxpayer's total income. This credit cannot exceed $750, this credit limit is adjusted annually for inflation. Policy Change: Increases the maximum senior circuit breaker tax credit to $1,755.
RENTAL DEDUCTION •Current Law: The rental deduction cap is currently at $3,000. The deduction is 50% of rent up to the cap. Policy Change: Increases the rent deduction cap to $4,000.
CHILD/DEPENDENT CREDITS: •Current Law: The credit is $180 for one child/dependent and capped at $360 for 2 or more children/dependents. •Policy Change: Increasing the child/dependent care credit to $310 per child/dependent and eliminates the child cap.
EARNED INCOME TAX CREDIT •Current Law: The MA EITC is based off the federal EITC. Federal IRC section 32 defines qualifying individuals. MA resident who qualifies for this credit can match it up to 30% of the federal credit. • Policy Change: Increases the state Earned Income Tax Credit to 40% of the federal credit. distributors but guarantee no savings .