New Bedford Guide Your Guide to New Bedford and South Coast, MA
It’s always a big relief when taxes are done. My biggest frustration each year is that the Massachusetts state government keeps squeezing the low income and middle class families by only allowing tax payers to deduct $250 of their monthly rent. The state could easily put $500 back into the pockets of the average Massachusetts renter. Lots of math ahead, but stay with me!
The average rent in Massachusetts is about $1,100, but for state taxes the maximum deduction allowed is 50% of your rent not to exceed $3,000. Basically, you can deduct a maximum of $250 off your monthly rent. Let’s examine what that means for your bank account.
The state tax in Massachusetts sits at 5.1%.
If you pay $500 a month for rent you can deduct $3,000 of the $6,000 that you paid from your annual income. That equates to a $153 tax break ($3,000 x 0.051 = 153). If you gave your landlord $6,000 the state allows you to get $153 back from your tax iability. Doesn’t seem like a big break, does it? If Massachusetts allowed you to deduct the entire $6,000 you would get twice the amount back or $306 total.
Now let’s examine if the average rent payer in Massachusetts was allowed to deduct their entire monthly rent of $1,100 or $13,300 annually. The total tax break would be $673.20 ($13,300 x 0.051 = $673.20). Currently, the max tax break is $153. $673.20 minus $153 is $520.20. That’s over $500 back into the average Massachusetts resident’s pocket.
With so many pushing for higher minimum wages, giving $500 worth of relief is common sense. I can promise you the government will find other ways to make up the money. If you think this is a good idea, contact you legislator and let them know!
