Circuit Breaker Tax Credit

• You must be a Massachusetts resident or part-year resident.

• You must be 65 or older by December 31 of the tax year.

• You must file a Schedule CB with your Massachusetts personal income tax return. 

• You must own or rent residential property in Massachusetts and occupy it as your primary residence.

• For tax year 2022, your total Massachusetts income doesn't exceed:

  • $64,000 for a single individual who is not the head of a household.

  • $80,000 for a head of household.

  • $96,000 for married couples filing a joint return.

• If you are a homeowner, your Massachusetts property tax payments, together with half of your water and sewer expense, must exceed 10% of your total Massachusetts income for the tax year.

• If you are a renter, 25% of your annual Massachusetts rent must exceed 10% of your total Massachusetts income for the tax year.

• The assessed valuation of the homeowner's personal residence as of January 1, 2022, before residential exemptions but after abatements, cannot exceed $912,000.

• The Schedule CB must be completed within 3 years from the last day for filing the return, without regard to any extension of time to file.

• You are a nonresident. 

• You are married and your status is married filing separately.

• You are a dependent of another taxpayer.

• You receive a federal and/or state rent subsidy or you rent from a tax-exempt entity.

• For tax year 2022, the assessed value of principal residence exceeds $912,000.

• If you did not complete a Schedule CB within 3 years from the last day for filing the return, without regard to any extension of time to file.

For the tax credit's purposes, your total income is your Massachusetts adjusted gross income (Massachusetts AGI) increased or decreased by various amounts when originally calculating Massachusetts AGI, such as:

• Income from social security

• Retirement 

• Pension or annuities 

• Cash public assistance

• Tax-exempt interest and dividends

• Short-term and long-term capital losses

• Certain capital gains

• Income from a partnership or trust not otherwise included in your Massachusetts AGI

• Gifts

• Returns of capital reported on Schedule C

• Gross receipts from any other source other than the tax credit itself

Include Massachusetts gross income when calculating total income. Generally, federal gross income excluded from Massachusetts gross income by specific law, such as interest from certain U.S. and MA obligations, is added back in the total income calculation.

Generally, do not add back anything excluded from federal gross income into the total income calculation if it's not defined as income and not included in Massachusetts gross income by specific law. Do not add back subsidies, insurance programs and similar reimbursement programs, etc. into the total income calculation.

Included (but not limited to) while calculating total income
 

• Cash public assistance (Schedule CB, Line 6) - Includes food stamps and welfare, as well as other payments you received from a government or quasi-governmental agency such as emergency rental assistance due to a fire. Also includes:

  • Fuel assistance - Include it if paid directly to you. For example, include a one-time emergency check to fill a tank.
    However, if the assistance is paid through a discounted rate program (3rd party beneficiary and your income qualifies for below-market rates) the payment is generally considered in-kind assistance and you should exclude it from calculating income.

• Disability income (Schedule CB, Line 6) - Include it if paid in lieu of wages

• Food stamps - See cash public assistance above

• Gains from sale of personal residence under $250,000/$500,000 (Schedule CB, Line 6)

• Gifts (Schedule CB, Line 6)

• Massachusetts and U.S. government contributory and military noncontributory pensions (Schedule CB, Line 5)

• Previously taxed income distributions (Schedule CB Line 5) from:

  • IRA/Keogh

  • Annuity

  • Stock bonus

  • Pension

  • Profit sharing plan

• Return of capital (Schedule CB, Line 6) - e.g. sale of stock: cost = $100, Selling Price = $500, gain = $400. Gain of $400 is reported as capital gain, and return of capital of $100 is added back in Line 6, Schedule CB.

• Sick pay (Schedule CB, Line 6) - Include it if paid in lieu of wages

• Social security benefits received (Schedule CB, Line 4) - These may include:

  • Retirement

  • Disability

  • Dependent

  • Survivorship

  • Insurance
    Do not subtract out Medicare premiums withheld from SS checks (Form 1099 SA).

• Welfare - See cash public assistance above

• Workers' compensation (Schedule CB, Line 6)

Income added back:

• Estate income (Schedule CB worksheet) - Earned income from an estate, e.g. the estate is in probate, or cannot be settled due to a pending lawsuit; any interest income earned from funds left in the account, or rental income earned from rental property that is part of the estate is included. Generally reported to beneficiaries on a K-1.

• Gains included in U.S. Schedule D (not including losses) - CB Worksheet, Part 3., Lines 12 -17

• Interest income from U.S. and Massachusetts government bonds, notes and bills - CB Worksheet, Part 2, Line 8

Excluded while calculating total income

• Estates - One time distributions that have been probated are not included since they're not part of federal gross income

• Life insurance policies - Proceeds payments are not included since they're not part of federal gross income

• Losses included in U.S. Schedule D

• Net worth of assets - Accumulated earnings in an account such as deferred compensation, IRA, etc.

• Payments, in-kind payments, or monies received that are otherwise not defined as:

  • Wages

  • Payments in lieu of wages

  • Income

  • Other income

  • Return of capital

  • Gross receipts

• U.S. Series E and Series EE bonds - These are considered investment bonds and do not earn interest each year. Instead, the income is recognized federally only at the time the bond matures and the holder cashes it in. In years prior to maturity, there would be no income.

For Schedules C and E, the net profit or loss amount = Massachusetts AGI. The only addback for purposes of calculating total income would be any return of capital.

This total income amount is also reduced by certain exemptions that are allowed for:

• Taxpayers who are at least age 65 by the end of the tax year

• Dependents

• Blindness

• Certain deductions reported on Massachusetts Schedule Y, Lines 1 through 10

Remember, If you own your properties and your property tax payments (excluding any exemptions and/or abatements) are greater than 10% of your total income for the tax year, you can claim a credit equal to the difference between your property tax payments and 10% of your total income, including assessed water and sewer use charges.

Total income:

Massachusetts adjusted gross income
+ All other income excluded from Massachusetts gross income
- Minus the personal income dependent, over age 65 and blindness exemptions
= Total income

Property tax payments:

Total tax paid in the tax year (or 25% of rent)
- Real estate tax abatements
- Exemptions and other reductions you received in the tax year
- Interest and penalty charges on late payments
+ 50% separately stated water and sewer charges paid in the tax year
+ Betterments
= Property tax payments

For homeowners, property tax payments are the actual amounts you paid during the calendar year after making certain adjustments. Include all property tax payments you made during the calendar year, regardless of which year payments apply to. Use all real estate tax payments made in the tax year, including amounts due for another year, to determine the correct property tax payment amount for purposes of the credit.

Adjust your property tax payment amount by subtracting the following from total tax you paid in the tax year:

• Abatements granted by local assessors

• Exemptions granted by cities or towns to:

  • Qualifying veterans

  • Surviving spouses

  • Blind persons

  • Senior citizens who earned exemptions through the Senior Work Program. If you participate in the Senior Work program, you already receive a reduction in the property taxes you owe. Do not include this reduction in calculating property tax payments.

• Interest and penalty charges on late payments

No adjustment is required for taxes assessed:

• Under the Community Preservation Act

• Under the Cape Cod Open Space Land Acquisition Program or

• By a tax-levying district

Water and sewer use charges

If you live in a community that doesn't include water and sewer debt charges in their property tax assessments, you can include, in addition to your own property tax payments, 50% of the actual water and sewer use charges you paid during the tax year when calculating your credit.

Generally, you're allowed to include 50% of the total water and sewer charges you paid when calculating the Circuit Breaker property tax payment. However, certain communities already include water and sewer charges in their taxpayers' real estate tax bills.

The communities that do this are:

• Arlington

• Avon

• Hadley

• Hatfield

• Webster

• Winchester

Include betterments in the water and sewer use charges if they're directly connected to either constructing, repairing, and/or maintaining a water and sewer system, including sewage treatment plants.

The cost to pump a septic tank does not qualify as water and sewer use charge since a private cleaning company cleans those and it is not a charge levied by a city or town.

However, charges from a town sewage treatment facility (town health department) for processing septic tank waste and discharging it as a liquid is allowed since the amount is levied by a city or town.