As part of the Fiscal year 2025 budget recently signed by the governor on July 29, 2024, the Massachusetts personal income tax code now conforms to the Internal Revenue Code as amended as of January 1, 2024.
The following six provisions are new or have been amended as a result of this legislation effective January 1, 2024.
Limitation on Noncorporate Excess Business Loans. Noncorporate taxpayers have been able to benefit from being able to deduct excess business losses up to $250,000, or $500,000 in the case of a joint return, since 2018 (adjusted for inflation). Under the Inflation Reduction Act of 2022, the loss limitation was extended through 2028 for federal tax instead of 2026. This limitation is also extended for Massachusetts personal income tax purposes through 2028 as well.
Change to Eligibility Requirements for Federal Charitable Contribution Deductions. Due to a code update Massachusetts conforms to any federal changes with respect to the charitable contribution deduction. Recent changes impact the eligibility requirements for qualified conservation contributions made bypass-through entities. Unless certain requirements are met, these contributions will not be treated as Qualified Conservation Contributions made bypass-through entities after December 29, 2022.
Repeal of Deduction of Interest and Dividends from Massachusetts Banks. Massachusetts will be repealing the deduction of interest and dividends from banks located in the state. This previously allowed for a deduction of $200 for a joint return or $100 for all other filing statuses. For tax years starting January 1st, 2024, the deduction will no longer be available.
Clarification on the Availability of the Title 5 Credit for Mandated Septic System Repairs, Replacements, Upgrades, or Sewer Connections. This provision provides clarity on what qualifies as eligible repairs, replacements, upgrades, or sewer connections that can be taken as a credit. Note to claim the credit the taxpayer must obtain a verification letter from the city or town in order to claim credit for the year the work was done.
Exemption from Joint Filing Requirement for Certain Married Couples. Amended the rule that a joint return had to be filed in Massachusetts if the couple were to file a joint federal return. If at least one spouse’s Massachusetts gross income did not exceed $8,000, a joint return does not have to be filed. This takes effect for tax year 2024.
Repeal of the Sales Tax Exemption for Certain Publications of Tax-Exempt Organizations. This provision repeals the sale tax exemption for sales of publications of any corporation, foundation, or institution organized under Code § 501(c)(3). This applies on all items except where the publications are produced in accessible format for individuals who cannot read print due to a disability. This is effective September 27, 2024.
Tax Amnesty Program for FY2025. This Act, which runs from November 1st through December 30, 2024, allows taxpayers to file any delinquent tax returns or pay unpaid tax debts with the benefit of penalties such as those for late filing or payment to be waived. During the 60-day period taxpayers can file proper returns but must pay the tax owed in a timely manner. This program will help benefit taxpayers who have not filed or have previously filed incorrect returns to get in compliance. Please review our other blog on this matter for further information.
For more information from the Commonwealth of Massachusetts website, click here.
If you have any questions about how this new legislation may apply to you, please call us at (401) 921-2000 or contact us here.