Governor Maura Healey on Wednesday signed a $1 billion tax package into law, putting ink to her campaign promise to boost Massachusetts’ affordability and competitiveness.
The bill, regarded as the most significant piece of legislation that has come across the governor’s desk since she took office, will beef up tax credits for caregivers, renters, and seniors, and appease the business community as well.
“We’re in a state whose future depends on the big dreams of our people,” said Healey, flanked by Lieutenant Governor Kim Driscoll and legislative leaders. “But people can’t realize their dreams until the nightmare of high costs ends.”
It’s been more than two decades since the last significant tax cut, when voters — not legislators — approved a measure to slice the state’s income tax to 5 percent. But even that was slowed by Beacon Hill, after lawmakers created a years-long process to more gradually phase in the decline, meaning it ultimately took 20 years to fulfill voters’ wishes.
Healey said she and Driscoll will kick off a statewide listening tour Thursday with visits to Gardner and Haverhill to raise awareness about how taxpayers can benefit from the package.
Here’s what the new tax package could mean for your wallet:
Parents of children or caretakers for disabled adults or seniors will see a sizable boost in the tax credit they can claim next spring. The bill increases the credit from $180 to $310 per dependent claimed on an individual’s 2023 taxes, and then to $440 for 2024. The law also lifts the cap on how many dependents a caretaker can claim. That means a family with four children could eventually claim $1,760. Before these changes, that same family only would have been able to claim $360.
For low-income earners
The new policy will boost the amount low-income earners will receive as part of the earned income tax credit from 30 percent of the federal credit to 40 percent. For example, a single parent of two making less than $50,000 a year would receive $2,465 in credit, an increase from the current rate of $1,849. A married couple with three children who make collectively less than $60,000 a year would receive $2,774 instead of $2,081.
Previously, renters were allowed to deduct half of their rent paid from their taxes each year, up to $3,000. This bill increases that cap to $4,000.
Individual seniors who make less than $80,000 or couples that make less than $96,000 and spend a certain amount on property taxes or rent could see a $2,400 tax credit, which is double the current refundable senior circuit breaker tax credit of $1,200.
Commuters who use public trains and buses, ferries, regional transit passes, and claim bike commuter expenses, will be eligible to deduct up to $750 from their taxes. Before, only commuters who paid tolls or purchased passes from the MBTA were eligible for the deduction
For homeowners with septic systems or lead paint
The law will take the edge off the price tag for homeowners facing the high costs of replacing or repairing aging septic tanks. The maximum tax credit triples from $6,000 to $18,000 and increases the amount a household can claim to $4,000 per year.
The change could mean the difference of thousands of dollars for homeowners in places like Cape Cod, where state officials recently imposed new regulations, giving communities two years to opt into a permitting process in a bid to reduce nitrogen pollution. If they don’t, new septic systems in the watershed would be required to include enhanced nitrogen-reducing technology, and homeowners would be on the hook to upgrade existing systems within five years.
The new law also increases the maximum credit that can be claimed to 60 percent of total expenses. So if someone is facing a $15,000 bill to improve their system, they can claim up to $9,000, instead of the $6,000 they could have under the old language.
For families with older homes containing lead paint, the law also doubles the tax credit to $3,000 for full abatement — that is the process of reducing lead paint hazards in the home — and $1,000 for partial abatement.
The law raises the threshold at which an estate is hit by the state’s tax from $1 million — currently the lowest in the country — to $2 million. The state will also now offer a uniform tax credit of nearly $100,000, effectively eliminating what officials called a “cliff effect,” wherein an entire estate gets taxed what it hits the threshold, not just the amount over it.
Legislative officials estimate the change would cost the state about $210 million a year.
Day traders who made short-term capital gains — profits on investments held up to a year — will only pay a 8½ percent tax rate, a cut from 12 percent.
How much someone saves, of course, depends on their earnings. For someone who makes $50,000 on buying and selling stocks, for example, he or she would save $1,750 — the difference between paying $6,000 at the old tax rate and $4,250 at the new one. Legislative officials estimate the change will ultimately save taxpayers anywhere between $45 million to $50 million a year.
For dairy farmers
The new law increases the cap on what dairy farmers can deduct from their taxes from $6 million to $8 million, which could take the edge off profit margins during downturns in milk prices.
Hard ciders can be boozier at a lower tax rate. Ciders at 8.5 percent alcohol will still be taxed at three cents per gallon, offering what officials cast as significant relief to cider makers. Currently, hard ciders over 6 percent alcohol get taxed $1.10 per gallon.
Matt Stout of the Globe staff contributed to this report.