The Circuit Breaker
As tax season approaches, senior citizens should remember the property tax credit called “The Circuit Breaker.†This credit is called the Circuit Breaker Tax Credit because it is “triggered,†like an electrical circuit breaker, when property tax payments exceed 10 percent of a senior citizen’s annual income. The credit cannot exceed $750, and is available to single and joint filers aged 65 and older.
Working with Senate President Tom Birmingham, I supported this tax break because there are thousands of senior citizens across the Commonwealth who currently find themselves in homes that have greatly appreciated in value since they were first purchased. At the same time, many of these seniors are now on fixed incomes as they enjoy their retirement. As a result, these senior citizens are paying property taxes that represent an unreasonably high percentage of their income.
The provisions of Proposition 2 ½ have created a difficult dynamic for many seniors. Often, these seniors find themselves pitted against proponents to fund schools, not because they are opposed to the idea of spending more money for education, but because they simply cannot afford the additional taxes. The Circuit Breaker Tax Credit is designed to provide some relief from this dynamic.
The credit is limited to taxpayers who are 65 years of age or older with incomes of $41,000 or less for single filers, $51,000 or less for head of household filers and $61,000 or less for joint filers. Also, the assessed valuation of the homeowner's personal residence cannot exceed $412,000.
Those who qualify for the break will still be required to pay property taxes to their local communities. However, certain taxpayers may be eligible to claim a refundable credit on his or her state income taxes for the real estate taxes paid during the tax year on the residential property they own or rent in Massachusetts that is used as their principal residence. The maximum credit allowed is $385 for the tax year beginning January 1, 2001 and $750 for tax years beginning on or after January 1, 2002. If the credit due the taxpayer exceeds the amount of the total income tax payable for the year by the taxpayer, the excess amount of the credit will be refunded to the taxpayer without interest.
Eligible taxpayers who own their property may receive a dollar credit for every dollar of their property tax that exceeds 10 percent of their income, up to the $385 maximum. Certain water and sewer bills may also qualify for tax credits, depending on your community. Contact you local assessors office to determine eligibility regarding water and sewer claims. Senior citizens who rent their homes can also take advantage of the same dollar for dollar credit, up to the same $385 maximum, if 25 percent of their annual rent exceeds 10 percent of their annual income.
If you qualify for the Circuit Breaker Tax Credit there is no special application required. You can receive the tax credit by filling out a 2001 Massachusetts state income tax return before the April 2002 deadline. Official information packets for 2001 state income tax returns will include Circuit Breaker schedules and are available in local libraries and post offices.
This a relatively new program, so there are bound to be questions. If you would like more information, and are interested in determining your eligibility, please don’t hesitate to contact the Massachusetts Department of Revenue Customer Service Bureau at 617-887-MDOR or toll-free at 800-392-6089, or visit their website, www.mass.gov/dor. As always, please feel free to contact my office with any questions or concerns you may have regarding state-related matters.
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