Massachusetts made several important changes to the tax laws for 2004
and beyond. Here are some of them, in plain language and general terms. As
always, you should get specific advice about your situation rather than
relying on general information like this.
Same Sex Marriage
The most dramatic change is the approval by
Massachusetts of same sex marriages. For Massachusetts purposes only, a
married same sex couple's tax return must reflect their legal status. Same
sex couples may file jointly if they qualify to do so under the same rules
for joint filing that apply to all Massachusetts married couples. Because
of the way Massachusetts tax laws work, this shouldn't make much of a
difference in the total tax due, but some tax breaks are more available to
married couples, so at the margin there may be some lowering of tax. Note
that the Federal returns of such couples must still be filed as single. In
some cases, one partner might be able to claim the other as a dependent
for Federal tax purposes.
Commuter deduction
Beginning in 2004, taxpayers can claim a deduction
on their Massachusetts returns for FastLane payments, and/or for MBTA
transit or commuter rail passes. You have to pay more than $150 per year
to claim any deduction. Your deduction will be your qualified commuter
expenses, minus the $150 threshold amount, but not more than $750 per
taxpayer. Married couples can claim two separate deductions based on each
person's expenditures.
Hiring out of state contractors
If you hire a non-Massachusetts person
to perform services in Massachusetts as an independent contractor, and if
you pay that person more than $10,000, you may be required to withhold tax
from that person's fee and send the tax in to the state. Payments to
entertainers, athletes, public speakers or seminar instructors come under
the new law, but so do other types of services. It would be easy to come
under this requirement and not know it!
Estimated tax threshold changed
Massachusetts will henceforth require
you to pay estimated taxes or face a penalty, if the amount of tax not
covered by withholding exceeds $400. It used to be $200. Big deal - though
it will exempt some folks from penalties. (The IRS has a much higher
threshold.)
Let us know if you have more questions about these Massachusetts
changes or other tax planning matters as the end of the year approaches!