The Carlisle Mosquito Online

Friday, February 8, 2002


Rep. Atkins advises constituents on tax form changes for 2001

Representative Cory Atkins informs tax payers that the following changes will be implemented on the 2001 State Income Tax forms.

· Senior "circuit breaker" tax credit. Certain senior citizens in Massachusetts may now be eligible to claim a refundable credit on their state income taxes for the real estate taxes they paid on the Massachusetts residential property they own or rent and which they occupy as their principal residence. For tax year 2001, the maximum credit allowed is $385 and will be on the State tax form. For this (2002) and all subsequent tax years, the maximum credit amount is equal to $750 multiplied by the cost-of-living adjustment.

To be eligible for the credit for the 2001 tax year, a taxpayer must be 65 years of age or older by the close of the tax year (for joint filers it is sufficient if one taxpayer is 65 or older), must own or rent residential property in Massachusetts and occupy the property as his or her principal residence, and must not be the dependent of another taxpayer, be receiving a federal or state rent subsidy, or rent from a landlord not required to pay real estate taxes. The taxpayer's total income cannot exceed $41,000 for a single filer who is not the head of a household, $51,000 for a head of household, or $61,000 for taxpayers filing jointly. Married taxpayers must file a joint return to be eligible for the credit. Moreover, the assessed valuation of the real estate cannot exceed $412,000.

Eligible taxpayers who own their property may claim a credit equal to the amount by which their property tax payments in the current tax year, including water and sewer use charges, exceed 10 percent of their "total income" for the same tax year. For renters, the law assumes that 25 percent of their rent goes toward property tax; thus, renters may claim a credit in the amount by which 25 percent of their annual rental payment exceeds 10 percent of their total income.

Qualifying taxpayers are eligible for the credit even if they do not pay or owe any state income taxes. An eligible taxpayer that is not otherwise required to file a state income tax return (e.g., he or she has a gross income of $8,000 or less) may obtain a refund in the amount of the credit by filing a return with the new Schedule CB Circuit Breaker Credit attached. DOR would then issue a check for the amount of the credit.

· Charitable contributions deduction. Massachusetts taxpayers may, beginning with the 2001 tax year, claim a charitable contributions deduction on their state income taxes equal to the amount of the charitable contributions deduction allowed to them for the taxable year on their federal tax return. Although for federal income tax purposes a taxpayer must elect to itemize deductions in order to claim the deduction, a taxpayer is not required to itemize deductions on his or her federal income tax return in order to claim the Massachusetts charitable contributions deduction in this year's state tax return (Form 1). Taxpayers must save all receipts for the charitable contributions they wish to deduct on their returns.

· Increase in the undergraduate student loan interest deduction. The deduction for interest paid on undergraduate student loans is no longer limited to $1,000. Eligible taxpayers may now claim the full amount of interest paid.

· Increase in the exemption for adoption agency fees. The exemption allowed for fees paid within a tax year to a licensed adoption agency for the adoption of a child is no longer limited to the amount of fees that exceed 3 percent of taxpayer's Part B adjusted gross income. The exemption now extends to the full amount of fees paid.

· Increase in the earned income credit. This year, the Massachusetts Earned Income Credit, G. L. c. 62, § 6(h), is increased from 10 percent to 15 percent of the federal credit.

· Increase in the deduction for employment-related child and dependent care expenses. Taxpayers may now exceed the federal limit (see IRC § 21) on employment-related child and dependent care expenses for the deduction from Massachusetts Part B adjusted gross income. For the 2001 tax year, the maximum deduction is $3,600 for one qualifying individual, and $7,200 for two or more qualifying individuals. For the new year (2002) the deduction increases to a maximum $4,800 for one qualifying individual and $9,600 for two or more qualifying individuals.

· Expansion and increase in the dependent deduction from part B income. Effective for the 2001 tax year, there are two major changes to the deduction for taxpayers that have at least one dependent under the age of 12. The deduction has been increased from $1,200 to $2,400 for a single dependent, and to $4,800 for two or more dependents. The deduction now also extends to households with eligible elderly or disabled family members who qualify as dependents under IRC § 152. The deduction increases to $3,600 and $7,200, respectively, for the new year (2002) and all years going forward.

· Increase in the rental deduction. The existing deduction from a taxpayer's Part B adjusted gross income for rent paid for a principal place of residence is increased from a maximum of $2,500 to a maximum of $3,000.

Please contact Representative Atkins' office at 1-617-722-2080 with additional questions regarding these changes, to obtain tax forms, or for information about programs that can assist filers with the forms.

2002 The Carlisle Mosquito