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October 18, 2007
FREE CASH FOR SENIORS
Each fall, the Massachusetts Department of Revenue issues it’s annual update for a real estate tax credit for certain seniors, aged 65 or older. The credit is also known as the Senior Circuit Breaker Credit. This “free cash” started in 2001, at which time the maximum refund amount was $385. This year (2007) the maximum refund amount is $900.
This tax credit is available to renters and homeowners over the age of 65. Generally, this credit is available to those who don’t make enough to file a tax return and, to a lesser extent, those who make enough to file but have total income of less than $70,000. Total income for this purpose includes items not taxable in Massachusetts such as social security and other non-taxable items. For tax year 2007 the maximum refund available, regardless of whether you had any income tax withheld, is $900. For tax year 2006 the maximum refund was $870.
If you were not planning on filing income taxes this year because you did not have enough income, and have changed your mind in order to claim the senior circuit breaker credit, call me. I will prepare your income tax return and electronically file it for free! Last year I provided the same service and got over $45,000 in tax refunds for people who were entitled to this refund. For information on this free tax preparation service for those over 65 who are eligible for the senior circuit breaker credit, please call me at the Elder Law Center, (781)233-4444.
In order to get the refund you have to file a tax return. Some people think that in order to get a refund, you need to have had some tax withheld or paid in. That is not true. You can get this refund by filing a Massachusetts income tax return. 2001 was the first year that this credit was available. It’s too late to go back and file for 2001, but it’s not too late to file for 2004, 2005 and 2006. You could get up to $2,530 in refunds in total for those 3 years. Usually, if you are eligible for the credit in the current year, you were probably eligible in the prior years also. I’m sure that you, or someone that you know, has not filed income taxes because they thought they didn’t earn enough money. These people are entitled to this FREE MONEY.
The following is a summary of some of the key rules about eligibility for the refund.
· The taxpayer or spouse, if married and filing jointly, must be 65 years of age or older on Dec. 31,
· Can either own or rent their home,
· Total income cannot exceed $48,000 for single, $72,000 for married filing jointly, and
· Assessed value of home cannot exceed $772,000
· Not eligible if you live at subsidized housing
If you think you are eligible and would like assistance in getting your refund, please call. When you call you should have the following information available:
1. Real estate tax or rent paid during the tax year.
2. Water/sewer expense paid by year.
3. Assessed value of house on January 1 of the tax year.
4. Total Income. For this purpose you have to include all of your income, even items that are normally not taxed in Massachusetts such as social security and Mass pensions. This amount is then reduced by $700 if single or $1,400 for a joint return where both are over age 65 and further reduced by certain other deductions.
Calculation of the credit is as follows: Eligible taxpayers who own their own property may claim a credit equal to the amount by which the total of their property tax payments in the current year combined with 50% of their water/sewer usage charges exceed 10% of their “total income”. For renters, we substitute 25% of your rent for property tax payments.
To demonstrate, I’ve set up the following example of two single individuals who have income taxable in Massachusetts of $13,000. In addition they each receive social security and as former school teachers receive a pension from the Commonwealth that is not taxable on the state income tax return. One owns property and paid a total of $4,900 for real estate taxes and ˝ of their water/sewer bills and the other paid $1,700/month for rent. In both cases, their allowable tax and rent expenses exceeded 10% of their total income by more than $900, the maximum credit available for 2007. Each of them will receive a refund of $900 even though they never had any Massachusetts income taxes paid in or withheld for the year.
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Description ________________ Mass taxable income Add: Social Security Mass pension “Total Income” Real Estate tax plus 50% of water/sewer 25% of Rent Paid 10% of Total Income Taxes/Rent in excess of 10% of Income 2007 Maximum refund |
Property Owners _________________ $13,000 $12,000 $15,000 $40,000 $4,700 $ 200= $4,900 N/A $4,000 $900
$900 |
Renters _________________ $13,000 $12,000 $15,000 $40,000 N/A N/A $5,100 $4,000 $1,100
$900 |
This article gives general information and not specific advice on individual matters. Persons wanting individualized advice on matters discussed should contact an advisor experienced in those matters. To the extent this article provides information on legal matters, it is based on law in effect in Massachusetts on the date of posting (laws in effect in other states are often quite different).
Ronald H. Surabian is a CPA and attorney who works at the Elder Law Center in Saugus, Massachusetts. He also holds Masters in accounting and a Masters in tax law. He currently serves on the board of directors of the Massachusetts Chapter of the National Academy of Elder Law Attorneys. If you have any questions please call me at the Elder Law Center, One Essex Street, Saugus, MA 01906 (781)233-4444. To view this or any prior article, please visit our web site at www.elderlawcenter.org