Hey Massachusetts, How About a Tax Refund!

It’s been said, “A penny found is better than a penny earned – because a penny earned is taxed”. I can’t argue with that. But how about if it’s in the form of a tax refund? 

I guess I’d still be pretty happy about that, too. And luckily, more than three million Massachusetts taxpayers will get to experience this same joy, because we’re getting a tax refund from the state starting in November of this year.

Get this, Massachusetts is returning $2.941 billion in excessive revenue to taxpayers, thanks to an obscure law from 1986. Under the law, the refund is triggered when total state tax revenues in a tax year exceed an annual cap related to wage and salary growth. The ballot question called “Chapter 62F” allows for tax rebates when the state budget is overflowing, and Governor Charlie Baker announced details last Friday about how people will get their money later this fall. 

According to Baker, “In general, eligible taxpayers will receive a credit in the form of a refund that is approximately 13% of their Massachusetts Tax Year 2021 personal income tax liability”. The governor had earlier predicted that amount would be 7%.

Baker’s office said that the 13% is a “preliminary estimate and will be finalized in late October, after all 2021 tax returns are filed.”

To be eligible, you must have paid personal income taxes in Massachusetts in the 2021 tax year and filed a 2021 state tax return on or before October 17, 2022. State officials say both resident and non-resident filers are eligible for the tax refund, as are fiduciary filers like trusts and estates. Non-residents involved in partnerships are also eligible if their taxes are filed on a composite basis.

As an example, a single taxpayer with no children earning $50,000 could expect to get a refund of $325. The refund would jump to $488 with an income of $75,000; $650 with an income of $100,000; and $975 with an income of $150,000.

A married couple filing jointly with two children and earning $150,000 would see a refund of $913. The refund would rise to $1,238 with an income of $200,000; $1,563 with an income of $250,000; and $1,888 under an income of $300,000₁.

And if you filed your 2021 taxes and received a refund already, you still qualify for this “special” refund if your state refund was a result of overpayments. A previous income tax refund will not impact your eligibility to obtain additional refunds under this law. The only offsets of the refund are unpaid tax liabilities, unpaid child support and certain other debts. 

Folks, this is important so I’ll repeat it – to be eligible for the refund, you must ensure that your 2021 tax return is filed on or before October 17, 2022, even if you did not file an extension request.

And the state is making this easy on us, too. If you are eligible for a refund, you don’t need to do anything. You will either get a check in the mail or a direct deposit refund in November.

Another bonus? There is no income cap on who is eligible for the refund, and it’s not taxable as income at the state level.  The refund may, however, be taxable at the federal level to the extent you claimed itemized deductions on your federal return for Tax Year 2021, including your state income tax. If you itemized on your federal returns for Tax Year 2021, you’ll receive a Form 1099-G from the Department of Revenue by January 31, 2023, to use when completing your 2022 federal return.

You know, Cutter Family Finance faithful, it’s not often that I get to spend our time together celebrating little wins like this. So whether you consider these funds “found” or “earned”, be sure to make good use of them, whether you add them to your portfolio or use them to treat yourself to something special.

And as always – be vigilant and stay alert, because you deserve more!

Have a great week.

Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield, MA. Insurance offered through its affiliate, CutterInsure, Inc. 

We do not offer tax or legal advice. Jeff can be reached at jeff@cutterfinancialgroup.com. This information is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk, including the potential for loss. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. Market data and other cited or linked-to content is based on generally available information and is believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A, Appendix 1, applicable Form ADV 2Bs and Form CRS as well as the firm privacy policy. Please contact us to request a free copy via .pdf or hardcopy. 1. https://tinyurl.com/2p8nnh42