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The Department of Revenue has just released the annual update of the state's real estate tax credit for certain persons age 65 and older. It's worth checking out because it could deliver a significant tax break worth close to $1,000 to many eligible homeowners and renters in tax year 2009.

Known as the Senior Circuit Breaker program, any Massachusetts taxpayer 65 and over who owns or rents a home that is their principle residence may be eligible for the tax credit which is used to reduce personal income tax.

For tax year 2009, the taxpayer's total income cannot exceed $51,000 for a single individual who is not head of household, $64,000 for a head of household, and $77,000 for married couples filing a joint return.

Also for tax year 2009, the assessed valuation of the residence may not exceed $788,000. If a taxpayer owns more than an acre of land, only the assessed value of the principal residence, along with the land immediately surrounding it, not to exceed one acre, shoud be used to determine eligibility.

The credit 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, exceeds 10 percent of the taxpayer's total income. For tax year 2009, the maximum credit amount is $960.

How would this work in practice? Let's say a married couple has an annual income of $50,000 and a property tax and water and sewer bill of $6,000. Ten percent of their income is $5,000; their combined tax bill is $6,000, the difference is $1,000, so they qualify for the maximum credit of $960.

The circuit breaker tax credit also works for renters. It is equal to the amount by which 25 percent of the rent actually paid by the taxpayer during the taxable year exceeds 10 percent of the taxpayer's total income, providing the maximum credit does not exceed $960.

How would this work in practice? Let's say a married couple, retired, with an annual income of $25,000 pays a monthly rent of $1,000 or $12,000 annually. Ten percent of their income is $2,500, which is less than 25 percent of their rent, which equals $3,000. They are entitled to a $500 tax credit.

Last year, more than 68,000 taxpayers statewide qualified for the Senior Circuit Breaker Tax credit and received $50 million in tax relief. By the way, if you were eligible for this tax credit in previous years but did not take it, you can go back three tax years and file amended returns to receive it.

Here is a link to more information on other tax breaks for  senior citizens. 

We welcome your questions and comments.

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