Senior Tax Relief- Part I

Back in October 2011 I posted a summary about a meeting at the Longmeadow Adult Center explaining a new tax relief measure that was being proposed by John Bowen and the Longmeadow Council on Aging.  This new measure was being based upon the Massachusetts Circuit Breaker Tax Credit.

After this meeting I did some research about the Circuit Breaker Tax Credit and found that the toughest qualification was being 65 years of age or older in order to be eligible to receive up to $980 from the state of Massachusetts.  The Circuit Breaker Tax Credit helps Massachusetts senior homeowners whose real estate taxes, sewer, and water bills combined consumed more than 10% of their total income.  The state also helps renters whose water, sewer, and 25% of the rent combined totaled more than 10% of their income.

Former State Representative Mary Rogeness of Longmeadow wrote in the Longmeadow News in 2001 after the law was passed:

“The Circuit Breaker is designed to provide property relief to low and moderate income senior Citizens through their income tax filing.”

As I continued to review the 10 year old Circuit Breaker Tax Credit, I discovered that it no longer appeared to solely meet its original targeted purpose of assisting seniors who are in financial need.

For example, a Longmeadow property owner with an annual income of $35,000 with a modest home assessed at $150,000 and a $500 water/sewer charge would qualify for $0.

In contrast a property owner with an annual income of $78,000 (married/filing jointly) with a house assessed at $729,000 and a water/sewer bill of $500 would receive the full $980 tax credit.

The circuit breaker tax credit is based upon the actual real estate taxes paid by a taxpayer who is eligible to claim the credit.  It is equal to the amount by which the taxpayer's property tax payments in the current tax year, including water and sewer charges exceeds 10 percent of the taxpayer's total income, up to a maximum credit amount for tax year 2011 of $980.

Below is a table showing the income (married/ filing jointly) and property assessment thresholds to obtain the full $980.

For a given income level, the above table shows the minimum assessed property value to obtain $980 maximum tax credit at different income levels.  This tax credit as structured provides tax relief to high as well as low annual income levels.

To qualify:

• you or your spouse must be age 65 or older by the end of the tax year 
• if married, you must file jointly 
• if you are a homeowner, your property's assessed value cannot be greater than $729,000 on January 1, 2011 
• you must meet the income limits

Your total income cannot be greater than these limits for the 2011 tax year:

•    $52,000 single
•    $65,000 head of household
•    $78,000 married filing jointly

"Total income" includes some types of non-taxable income, such as social security, retirement, pensions and annuities, cash public assistance, tax-exempt interest and dividends, and certain other income.

Check out this spreadsheet to see if you qualify for the Circuit Breaker Tax Credit.

Here is a link to some additional tax tips from the Mass.gov website
http://www.mass.gov/dor/docs/dor/taxtips/seniors11.pdf

Some interesting facts about the Massachusetts Senior Circuit Breaker Tax Credit…

1. In tax year 2009, the most recent tax year for which complete information is available, 80,566 taxpayers received $61.1 million in cash or credits used to lower income tax payments, an average of $759 per taxpayer.
   
   
2. For the tax year 2009, there were 353 Longmeadow taxpayers who received a total of $306,342 or an average of $868.

In Longmeadow there are almost 3000 town residents over 65 (2010 census) with a median household income of $45,900 (based upon 2005-2009 survey).  Based upon this information I would expect that there are many more senior citizens in our town that could qualify for this tax credit who are not doing so. 

Remember, you do not need to pay Massachusetts income taxes to receive a check.

Call your tax preparer today if you think that you might qualify!

If you are eligible, you can go back three years and claim the credit retroactively. If you owe tax, the credit is deducted from the amount owed. And if you don't owe tax, the state cuts you a check. It's worth taking a few minutes to do the math on this.

Here is a link to the 2011 Circuit Breaker Tax Form. 

John Bowen and the Council on Aging have redirected their efforts and submitted an article that will appear on the Annual Town Meeting warrant (by petition) which does not rely upon the same criteria as the Circuit Breaker Tax Credit.