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2024 Tax Law Changes

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2023 Tax Law Changes

Changes to Massachusetts Income and Estate Taxes

Substantial changes to the Massachusetts estate tax, capital gains tax and the Massachusetts Millionaires Tax recently became law under legislation titled An Act to Improve the Commonwealth’s Competitiveness, Affordability, and Equity (Act), which was signed by Gov. Maura Healey on Oct. 4, 2023. The Act makes the following key tax changes:

Short-Term Capital Gains

Short-term capital gains will now be taxed at 8.5%, instead of the previous 12%, effective as of January 1, 2023.  Note, however, that if the Massachusetts “millionaires tax” applies, its 4% surtax will bring the rate on short-term capital gains to 12.5%.

Child Dependent Tax Credit

Massachusetts currently lets parents and guardians claim a tax credit of up to $240 for each child they have under the age of 13 — as well as dependents over the age of 65 and disabled dependents of any age. The new bill increases the credit to $310 per dependent for the 2023 tax year and then up to $440 for tax year 2024 and beyond.

  • That means an eventual savings of $200 per child if you’re a parent already taking full advantage of the current credit.
  • Additionally, the bill eliminates the current credit’s limit of two qualifying dependents, meaning potentially even more savings for those with three or more kids. For example, a couple with four kids would get an additional $1,280 a year starting in the 2024 tax year.

Rental Deduction

Massachusetts currently lets renters write off 50% of their rent from their taxes each year, up to $3,000. The bill increases that maximum deduction to $4,000.

  • If you pay more than $8,000 in rent a year (and who doesn’t if you rent in the Boston area), the increased deduction means you’ll save an extra $50 a year.

Senior Circuit Breaker Credit 

Massachusetts allows lower-income residents aged 65 and older to claim a $1,200 credit on their taxes. The bill doubles that credit to $2,400.

  • For the last tax year, the income limit for the credit was $64,000 for a single individual and $96,000 for a married couple filing jointly. It’s worth noting the eligibility rules depend on exactly how much you pay in property taxes or rent. But if you qualify, the change means you save another $1,200 a year.

Earned Income Tax Credit 

The bill would increase Massachusetts’ earned income tax credit (EITC) for low-income residents, from 30% of the federal EITC to 40%.

  • The impact depends on your personal circumstances. For example, if you’re single with no kids and made the maximum qualifying amount for the EITC last year ($16,480), you’d save an additional $56. But if you’re a parent of two making the maximum ($49,399), you’d save over $600 more a year.

Massachusetts Estate Tax

The threshold for estates subject to Massachusetts estate tax is doubled to $2 million from the current $1 million, and no Massachusetts estate tax will be due where the federal taxable estate is $2 million or less.

  • For Massachusetts residents, the Act clarifies that out-of-state real estate and tangible personal property are not subject to the Massachusetts estate tax.
  • These changes are effective as of January 1, 2023, so they will benefit estates of decedents who died any time this year.

Closing Millionaires Tax Loophole for Married Couples

The Massachusetts Millionaires Tax (Millionaires Tax), enacted in 2022, imposes an additional 4 percent income tax on a Massachusetts tax filer’s return reporting income over $1 million. Accordingly, Massachusetts taxes the first $1 million of income at 5 percent and any income thereafter at 9 percent. To legally report less income on a return, some married taxpayers could elect to file their returns separately with the Commonwealth and jointly at the federal level, which afforded favorable tax treatment at both levels.

Starting in the 2024 tax year (but not for 2023), married couples must file their Massachusetts tax returns using the same filing status (that is, jointly or separately) as their federal returns. This is intended to eliminate a “millionaires tax” loophole permitting dual-income taxpayers to file separate Massachusetts returns with no federal tax consequence, which would have allowed each spouse to avoid the 4% millionaires surtax on the first $1 million of taxable income.

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Sweeping Retirement Changes – Secure 2.0 Act

The SECURE 2.0 Act, a significant piece of legislation enacted last year, has substantially changed retirement account rules. These changes directly impact retirement savings plans, including 401(k), 403(b), IRA, Roth accounts, and related tax breaks. The main objective of this new law is to encourage more workers to save for retirement. However, some of the complex changes have caused confusion for taxpayers and plan sponsors. Click on the link below for a chart of the retirement changes.

Secure 2.0 Chart – Retirement

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IRS FAQs on Green Energy Credits

This Fact Sheet issues frequently asked questions about energy efficient home improvements and residential clean energy property credits.

Energy Credits IRS faq-2022-40

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Understanding Your 1099-K – IRS Guidance

Form 1099-K is a report of payments you got during the year from:

  • Credit, debit or stored value cards such as gift cards (payment cards)
  • Payment apps or online marketplaces (third-party payment networks)

Third-party payment networks are required to file Form 1099-K with the IRS and provide a copy to you. Form1099-K should not report gifts or reimbursement of personal expenses you received from friends and family.

Use Form 1099-K with other tax records to help figure and report your taxable income when you file your taxes.

Form 1099-K, Payment Card and Third Party Network Transactions

Who Sends Form 1099-K

Payment card companies, payment apps and online marketplaces are required to file Form 1099-K with the IRS. They also must send a copy of the form to taxpayers by January 31.

1099-K

You should get Form 1099-K for these situations:

If You Receive Any Payments With Payment Cards

This includes credit cards, debit cards and stored value cards (gift cards).

If You Received Payments With a Payment App or Online Marketplace

This includes payments for a personal item you sold or for goods you sell, services you provide or property you rent through any:

  • Peer-to-peer payment platform or digital wallet
  • Online marketplace (sale or resale of clothing, furniture and other items)
  • Craft or maker marketplace
  • Auction site
  • Car sharing or ride-hailing platform
  • Real estate marketplace
  • Ticket exchange or resale site
  • Crowdfunding platform
  • Freelance marketplace

Gifts or reimbursement of personal expenses from friends and family should not be reported on Form 1099-K. They are not payments for goods or services.

What Shouldn’t Be Reported on Form 1099-K

Money you received from friends and family as a gift or reimbursement of a personal expense should not be reported on a Form 1099-K. For example:  Sharing the cost of a car ride or meal, receiving money for birthday or holiday gifts or getting repaid by a roommate for a household bill. These payments aren’t taxable income.

Be sure to note these types of payments as non-business when possible in the payment apps.

Take these steps if you receive a Form 1099-K in error.

What to Do With Form 1099-K

Here’s what to do if you receive a Form 1099-K:

Check the Information on the Form

Review the information on the Form 1099-K to make sure it’s correct.

Take these steps if:

  • You receive the form in error
  • The information is incorrect
  • The gross amount doesn’t belong to you

Review the Gross Payment Amount

The gross payment amount (Box 1a) on Form 1099-K reports the total payments you received. It doesn’t include adjustments for fees, credits, refunds, shipping, cash equivalents or discounts. These items are not income. You can deduct them from the gross amount.

Compare the gross payment amount to your records. These may include reports from payment apps or online marketplaces, payment card receipts or merchant statements. Use the records to:

  • Confirm the gross payment amount is accurate
  • Check the gross amount for expenses you can deduct (fees, credits, refunds, shipping, refunds, etc.)

Good recordkeeping is important to support the income and deductible expenses you report on your tax return.

Use Form 1099-K to Help Report Your Income

Use Form 1099-K with your other tax records to help figure and report your correct income on your tax return.

How you report Form 1099-K payments on your tax return depends on the type of transactions you did:

  • If you sold a personal item
  • If you sold goods, rented property or provided services

If You Sold a Personal Item

You may get a Form 1099-K if you received payments for a personal item you sold through a payment app or online marketplace.

A personal item is something you owned for personal use such as a car, refrigerator, furniture, stereo, jewelry or silverware, etc.

How you report these payments on your tax return depends on whether you sold the item at a loss or a gain. If you sold a mix of personal items at a loss and a gain, report them separately.

Personal Items Sold at a Loss

A loss on the sale of a personal item isn’t deductible.

If you sold personal items at a loss, you have 2 options to report the loss:

Report on Schedule 1 (Form 1040)

You can report and offset the Form 1099-K gross payment amount on Schedule1 (Form 1040), Additional Income and Adjustments to Income.

Example: You receive a Form 1099-K for selling your couch online for $700, which is less than you paid for it.

On Schedule 1 (Form 1040):

Enter the Form 1099-K gross payment amount (Box 1a) on Part I – Line8z – Other Income: “Form 1099-K Personal Item Sold at a Loss, $700”.

Offset the Form 1099-K gross payment amount (Box 1a) on Part II – Line24z – Other Adjustments: “Form 1099-K Personal Item Sold at a Loss $700”

These 2 entries result in a $0 net effect on your adjusted gross income (AGI).

Report on Form 8949

You can also report the loss on Form 8949, Sales and Other Dispositions ofCapital Assets, which carries to Schedule D, Capital Gains and Losses.

Personal Items Sold at a Gain

A gain on the sale of a personal item is taxable.

If you receive a Form 1099-K for a personal item sold at a gain, report it on both:

  • Form 8949, Sales and other Dispositions of Capital Assets
  • Schedule D (Form 1040), Capital Gains and Losses

If You Sell Goods, Rent Property or Provide Services

You may get a Form 1099-K if you received payments through payment cards, payment apps or online marketplaces.

These transactions can include payments you received as a gig worker, freelancer or other independent contractor (self-employed). This may also include payments you received from selling items as a hobby.

Report Form 1099-K Payments and Other Income on Your Tax Return

You must report all income you receive on your tax return. This may include the gross payment amount shown on Form 1099-K and amounts on other reporting documents like Form 1099-NEC or Form 1099-MISC. It should also include amounts not reported on forms, such as payments you receive by cash or check.

Here’s where to report Form 1099-K payments on your tax return for goods and services you sold:

Sole proprietor (gig workers, freelancers and other self-employed people) – Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship)

Partnership – Schedule E, (Form 1040), Supplemental Income and Loss

Corporation – Form 1120, U.S. Corporation Income Tax Return or Form1120-S, U.S. Income Tax Return for an S Corporation

Rental income may be reported on Schedule E or Schedule C, depending on your situation.

If You Get a Form 1099-K in Error

You may get a Form 1099-K in error when the form:

  • Reports payments that were gifts or reimbursements from family or friends
  • Doesn’t belong to you or is a duplicate

If this happens:

  • Contact the issuer immediately – see FILER on the top left corner of Form1099-K
  • Keep a copy of the original form and all correspondence with the issuer for your records

Take these steps if you can’t get a corrected Form 1099-K.

If Your Form 1099-K Is Incorrect

Take the following steps if any of this information on the form is incorrect:

  • Payee Taxpayer Identification Number (TIN)
  • Gross amount of payment card/third party network transactions
  • Number of payment transactions
  • Merchant Category Code (MCC)

 

Request a corrected form from the issuer – see FILER on the top left corner of Form 1099-K. If you don’t recognize the issuer, contact the Payment Settlement Entity (PSE) on the bottom left corner of the form above your account number.

Keep a copy of the corrected Form 1099-K with your records, along with any correspondence you have with the issuer or PSE.

Don’t contact the IRS. We can’t correct your Form 1099-K.

If You Can’t Get a Corrected Form 1099-K

Report the amount on Schedule 1 (Form 1040), Additional Income and Adjustments to Income.

Example: You receive Form 1099-K for $650 your roommate sent you for their share of rent.

On Schedule 1 (Form 1040):

Enter the error on Part I – Line 8z – Other income: “Form 1099-K received in error, $650”

Adjust it on Part II – Line 24z – Other adjustments: “Form 1099-K received in error, $650”

These 2 entries note the error and result in a $0 net effect on your adjusted gross income (AGI).

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