Circuit Breaker Law Offers Property Tax Relief

JANUARY 2005
- Tax time is fast approaching. Because our public pensions are not
taxed by the Commonwealth, many members do not find it necessary to
file a state tax return.

Nevertheless,
there may be a very good reason why you may want to file a state tax
return in 2005. It's known as the "Circuit Breaker" - a law on which we
first reported four years ago after it had been enacted.

Beginning
in 2002, members, who were 65 or older the year before, could apply to
the state for relief from some of the property taxes that they paid,
either as a homeowner or renter, during the year before. They obtain
the relief either as a credit on their state income taxes or, even if
they owed no taxes, as a cash refund.

According
to Legislative Chairman Bill Hill, "Since its inception, eligible
members have paid less state income tax or received a refund check. You
can obtain the relief under the circuit breaker and still be eligible
for a property tax abatement offered by your town."

In
addition to being 65 or over in the prior year, a member must have an
income below certain thresholds which are adjusted annually for
inflation. While the figures, to be used this upcoming (2005) year,
were not available at press time, they should be slightly higher than
the thresholds for those applying in 2004, which were $43,000 for a
single person and $64,000 for a couple.

"When
calculating your income under the circuit breaker, you must include
your pension and Social Security," adds Hill. "But don't worry, since
these amounts are only part of the calculations under the circuit
breaker and otherwise remain totally exempt from state income taxes."

Those
members, who qualify, can obtain a tax credit or refund on the real
estate taxes paid in 2004 that exceed 10% of their income. Renters use
25% of the rent they pay in 2004 as their amount of real estate taxes.

For
example if an eligible member's income (including pension and Social
Security) was $25,000 and the property taxes paid or 25% of their rent,
amounted to $3,000, then they would receive a $500 credit or refund. We
arrive at that by subtracting $2,500, or 10% of their income, from the
$3,000 in property taxes.

There is a
maximum credit or refund, which is adjusted annually for inflation. For
those who applied in 2004, the maximum amount was $810.

For
members, who do file a state income tax return, they complete and
attach the separate circuit breaker forms, known as Schedule CB, to the
standard tax return (Form 1). Those, who otherwise would not be
required to file a return, must also complete a Form 1 and Schedule CB
in order to receive a cash refund. (At press time, forms and schedules,
to be completed in 2005, were not yet available from the Mass. Dept. of
Revenue).

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