Senior Circuit Breaker Tax Credit increases to $980 for 2011

Posted by:

Robert Bliss, Director of Communication, Department of Revenue

 

The Department of Revenue published yesterday the Technical Information Release that presents the new income, valuation and credit amounts for the Senior Circuit Breaker Tax Credit for tax year 2011.

The $980 maximum value of this credit for tax year 2011 is $10 more than the previous year.

There is no other refundable state tax credit that puts more money into the wallets of taxpayers 65 and older than the Senior Circuit Breaker Tax Credit. In tax year 2009, the most recent tax year for which complete information is available, 80,566 taxpayers received $61.1million in cash or credits used to lower income tax payments, an average of $759 per taxpayer. 

The circuit breaker tax credit is based upon the actual real estate taxes -- or rent -- 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 but excluding any abatement or exemption granted, exceeds 10 percent of the taxpayer's total income, provided that the credit does not exceed the maximum credit amount for tax year 2011 of $980.

A taxpayer's total income may not exceed $52,000 for a single individual who is not head of a household, $65,000 for a head of household, and $78,000 for a married couple filing jointly.

The maximum assessed valuation of a residence may not exceed $729,000, which is down from last year's maximum valuation of $764,000, reflecting a decline in the valuation of homes.

The credit also works for renters. It is equal to the amount by which 25 percent of the rent actually paid during the taxable year exceeds 10 percent of the taxpayer's total income, with the credit capped at $980.

How does this credit work in practice? Take the example of a married couple with an annual income of $60,000 and $8,000 in property tax and water and sewer bills for their home. Ten percent of their income is $6,000 and their combined property tax and water and sewer bills total $8,000, which is $2,000 more than 10 percent of their income, so they qualify for the maximum credit of $980.

For a married couple filing jointly that rents, take the example of a married couple with a $28,000 income who pay $12,000 annually in rent. Ten percent of their income is 2,800, which is $200 less than 25 percent of their rent, so they qualify for a credit of $200.

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.

Historic information on the number and amount of credits issued to taxpayers in each of the Commonwealth's 351 cities and towns over the years is published on DOR's web page. Click on the link that says Senior Circuit Breaker Usage Report.

 

 

Comments

[Robert Bliss]

Pam,

There is no need to prepare 2 Schedule CBs since your mother lived at the retirement community for the entire year of 2011 and that was her principal residence which is used to determine eligibility for the CB Credit. Because her home was not her principal residence for 2011, the R.E. tax paid is not considered for the CB Credit.

The entire amount paid to the retirement community cannot be considered rent as it included meals and utilities. An itemized statement from the retirement village that provides the amount of actual rent (separate of other fees) paid by your mother is required to calculate her Circuit Breaker Credit. Also, the retirement village must have paid real estate tax to the city or town where it is located in order for its residents to be eligible for the CB Credit.

[Pam]

My mother rented in a retirement community for the entire year of 2011. She still owned her home until May 2011, when it was sold, and thus paid real estate taxes in that period. TurboTax is indicating that the state of MA requires that she cannot e-file and must mail her forms so that she can complete two CB credit forms - one as a r.e. taxpayer, one as a renter. Also, the retirement village does not provide an itemized bill - her utilities and meals are included in the rent each month. Questions (1) - does she need to complete a separate form for the 4 months she still owned her home but did not reside in it? (2) - can the entire amount paid to the retirement village be considered "rent"? (3) - Since she resided in the retirement village for all of 2011 and paid rent for all of that period, can she use the entire annual rent amount to apply for the credit and ignore the 4 months of concurrent home ownership? Thank you for your help!

[Robert Bliss]

Stephen, there is eligibility for the CB Credit. Complete 2 Schedules CB noted with the ownership/rental dates to get total amount of credit. Also, prorate the income applicable for those time periods on the schedules.

[Robert Bliss]

Lewis, yes the entire $10,000 is considered income for purposes of calculating the credit.

[Lewis]

If my mom receives an annuity distribution of $10,000, $9000 being return of contributions and $1000 being taxable, does she need to include the entire $10,000 in income for the purposes of calculating the credit?

[Stephen Lavidor]

Can a person qualify for the CB credit if a homeowner for part of the year and a renter the rest of the year? Taking rent or RE taxes separately, the amount isn't enough to qualify. But RE taxes and 25% of rent taken together do result in a credit.
How would you fill in the Schedule CB? Thanks.

[Ann]

My parents elected to defer $2400 of the $4800 they paid in RE taxes during 2011. They paid the full $4800 during 2011 and were issued a check back from the town for $2400 in January 2012. 1) Do they claim that they paid $4800 in RE taxes on 2011 return since none of it was refunded back to them until January 2012, or do they reduce the 2011 RE taxes paid by the $2400 amount that was deferred? 2) By calculating the CB credit for 2011 I have determined that they would be able to defer only $1200 in RE taxes per year to be able to qualify for the full $980 in the CB credit. Since they have not cashed the $2400 check they received in January 2012 from the town, can this be returned and have the town reissue a deferred tax check amount of $1200 now so they would still be able to qualify for the CB credit for 2011? 3) My parents want to defer some of the RE taxes since they can use those funds now, but it doesn't make sense for them to defer $4800 in RE taxes (full yearly amount) and lose out on $980 in the CB credit. 4) We are going to discuss this with the town going forward to see if they will defer one RE payment out of four each year or 25% of each quarterly RE payment so my parents will still qualify for the CB credit. I am however concerned about the timing of the check they received in January 2012 for $2400 - Whatever the actual deferred amount is, does it reduce the taxes paid in 2011 where they received the check in January 2012, or does it reduce the amount of taxes paid in 2012? This problem arises because the town's RE taxes are paid on a fiscal year basis. 5) Does the MA DOR have individuals trained in tax law type questions concerning the CB credit that I can call and talk to about this? The towns tell you that you can defer the RE taxes, but no one discusses the impact that it will have on the CB tax credit. As it is, the interest on deferred RE taxes is 8% I believe, which is something that my parents were willing to pay, but to lose another almost 20% in the CB credit is a really stiff price to pay for deferrment. Might the State suggest to the towns that they indicate clearly on their deferrment applications that deferrment of RE taxes may reduce or entirely eliminate any potential CB credit? While I realize that State tax impact is not something that the towns are responsible for, a lot of seniors won't realize the problem until they go to do their tax returns. A simple disclaimer advising that the CB credit may be affected and to check with their tax advisors might be helpful to a lot of people in this same situation. Thank you in advance for any assistance you can give me on this subject.

[Robert Bliss]

Jackie, the answer is yes.

[Robert Bliss]

Kevin, the answer is yes.

[Jackie]

IS social security income included when estimating if a senior is eligible for the Circuit Breaker Tax Credit?

[Kevin Crane]

Can a deceased taxpayer's final return qualify for CB credit if taxpayer dies in August but had paid real estae taxes in 2011 prior to death?

[Robert Bliss]

Jack, good question. If Brooksby Village provides an itemization that includes the amount of rent exclusive of other fees, she could be eligible as a renter.

[Robert Bliss]

Debbi, the CB credit is not taxable for the following year federally or by the Commonwealth.

[Jack]

My mother lives in Brooksby Village in Peabody. She has paid for her apartment and gets her money back when she leaves. They charge her rent which includes one meal a day.

Does that situation make her eligible for the Curcuit Breaker Credit?

[Debbi]

Is it taxable the following year on the federal 1040 if I itemized last year?

[Robert Bliss]

Liz, you perhaps could qualify as a renter, but not as a homeowner.

[Robert Bliss]

Paul, yes, taxable amounts shown on Form 1, lines 4 and 9, must be entered on line 5 of Schedule CB.

[Paul G. LeBrun]

If a couple qualifies for No Tax Status on their return, must taxable amounts shown on Form 1, lines 4 and 9 be entered on line 5 of Schedule CB?

[Liz Fuller]

I live in an adult community where we own our homes but rent the land. Do we qualify for the tax credit?

[Robert Bliss]

Alan, the short answer is "yes," the refund you received from the Senior Circuit Breaker Tax Credit should be noted on your 2011 federal tax return as a state income tax refund.

[Alan Ross]

Is the money that was refunded via the Senior Circuit Tax Breaker to me by Massachusetts in 2011 -- on my 2010 Mass Tax return -- considered a "tax refund," when I file my 2011 Federal Taxes and Itemize deductions?

[Robert Bliss]

Charles, you need to file a tax return to receive the Senior Circuit Breaker Tax Credit.

[Charles J. Dell]

I AM NOT REQUIRED TO SUBMIT TAX INFORMATION, I'M A DISABLED MASS EMPLOYEE. I NEED INFORMATION AS TO WHAT IS REQUIRED FOR CIRCUIT BREAKER INFORMATION AS OPPOSED TO FILING ALL THAT IS ON THE FORM!

[Robert Bliss]

Pat, thanks for the heads up on the broken links. DOR -- indeed, all of state government -- has just migrated web content to new site, and a by-product of that migration is broken links. We will fix them.

[Pat]

links are broken